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Economic Uncertainty Takes Toll on Industrial Space Demand
Economic uncertainty caused by shifting tariff policies and persistently high interest rates has taken its toll on industrial real estate activity, the NAIOP Research Foundation said Thursday. Just 27 million square feet were absorbed in the first half of 2025 and demand shrunk by 11.3 million square feet in the second quarter, the first quarterly decline since 2010.
According to the NAIOP Research Foundation’s latest Industrial Space Demand Forecast, net absorption is expected to be nearly flat over the second half of 2025. However, demand will begin growing again in Q2 2026, with absorption of 119.3 million square feet projected for next year and another 109.7 million square feet in 2027.
“Demand for industrial space is expected to recover somewhat after occupiers have time to adjust to a new tariff regime,” according to the report. “However, higher tariffs and slowing employment growth will likely result in slower demand growth than that experienced from 2020 to 2022 or in the six years that preceded the pandemic.”
- ◦Lease
- ◦Economy
