2026 Biannual Industrial Market Overview: Part Three

The industrial market’s headline rent index has been flat for eight straight quarters, but that stability is hiding a split. Mega-format lease renewal premiums just rebounded from 49.2% to 83.7% in a year, while coastal markets like the Inland Empire and Los Angeles keep correcting and Chicago and Dallas-Fort Worth sit at or near cycle highs. Check out the full insights in the 2026 Biannual Industrial Market Report.

Bulk Effective Rents Turn Positive Year-Over-Year in Q1 2026, While Non-Bulk Continues to Slide
Average adjusted effective rents for bulk transactions of 200,000 square feet and larger reached $10.66 per square foot in Q1 2026, up 0.9% year-over-year and marking the first positive annual reading after an extended period of decline. From peak, bulk rents remain down 7.7%, a correction that has tracked closely with non-bulk transactions, which are off 7.9% from their own high.
The divergence lies in current direction. Non-bulk transactions, at $12.67 per square foot, continued to decline, falling 1.7% year-over-year in Q1 2026. Bulk’s turn to positive territory is a tentative signal of stabilization in the large-format segment, consistent with the share gains Mega-size leases recorded in the lease value composition data. Whether that stabilization holds will depend on whether the demand rotation toward larger formats observed in Q1 2026 persists through the remainder of the year as tariff uncertainty continues to weigh on occupier decision-making.

Landlord Lease Economics Weakening as Effective-to-Starting Rent Spreads Compress in Both Segments

The spread of effective rents over starting rent has compressed in both bulk and non-bulk transactions since their respective cycle peaks, signaling that landlords are offering more generous concession packages and that annual escalation rates are moderating. Bulk transactions posted a spread of 2.5% in Q1 2026, down from a peak of 4.7% in Q3 2024, while non-bulk fell to 1.4% from a peak of 3.9% in Q4 2023.

Both series compressed steadily through 2025, but bulk posted a modest uptick in Q1 2026, rising from 2.3% in Q4 2025 to 2.5%, while non-bulk continued its decline from 1.7% to 1.4% over the same period. Whether that one-quarter move signals a durable shift toward landlord leverage in large-format transactions or reflects normal volatility remains to be seen, but it is consistent with bulk effective rents turning to positive year-over-year growth in the same quarter.

Single-Tenant Net Lease Premium Holds Above 5% for Fourth Consecutive Quarter, Backed by Stronger Cumulative Rent Growth Since 2019

The single-tenant net lease (STNL) industrial starting rent premium over non-STNL transactions has held above 5% for four consecutive quarters through Q1 2026, reaching 5.6% as STNL averaged $11.46 per square foot against $10.85 for non-STNL. The premium troughed at 1.6% in Q1 2025 before jumping to 8.0% in Q2 2025, suggesting the re-emergence is a sustained trend, even as the premium has moderated from that high.

Since Q1 2019, STNL starting rents have grown 93.3% compared to 76.1% for non-STNL. Both segments peaked in Q4 2023 and have since corrected, but STNL’s cumulative advantage over the full period remains intact.

Free Rent (Bulk vs. Non-Bulk): Have Concessions Peaked?

Non-bulk free rent reached a cycle high of 4.5% of term in Q1 2026, continuing an unbroken climb from the 1.7% trough in Q4 2022. Bulk, at 4.8% of term, edged down from its own cycle peak of 4.9% in Q4 2025, the first quarterly decline after eleven consecutive quarters of increases from a 1.7% trough in Q3 2022.

The gap between the two series has narrowed. Bulk tenants held a 0.6 percentage point higher free rent ratio over non-bulk as recently as Q4 2025, which compressed to 0.3 points in Q1 2026 as non-bulk continued rising while bulk pulled back slightly. Both series remain well above pre-pandemic norms of roughly 2.2% to 2.3%, indicating that lease terms remain more tenant favorable despite the broader signals of tightening supply and demand conditions.

Non-Bulk Short-Term Leases See Steepest Escalation Compression from Peak, While All Segments Remain Above Pre-COVID Levels

Average annual lease escalation rates remained above pre-COVID levels across all transaction size and lease term segments in Q1 2026, with long-term leases at 3.42% and short-term at 3.29%, both well above their 2019 baselines of 2.67% and 2.58% respectively. The gap between long and short-term has narrowed to just 13 basis points from 31 basis points in Q4 2024, continuing a steady convergence.

Among the four transaction size and lease term combinations, non-bulk long-term leases retained the highest escalation at 3.52%, maintaining a 17 basis point premium over bulk long-term at 3.35%. Non-bulk short-term recorded the sharpest compression from peak, falling 40 basis points from 3.50% in Q3 2023 to 3.10% in Q1 2026, the steepest decline of any segment. Bulk short-term retains the largest gain over its 2019 baseline at 86 basis points, suggesting large-format shorter-commitment leases have held escalation terms most durably through the correction.

Check out the full 2026 Biannual Industrial Market Report.