Industrial Vacancy Rates on the Rise: What Colliers Predicts for This Year

louai86alsam
Jul 12
2 min read

Vacancy rates in industrial real estate have reached their highest level since 2015, standing at 7.1%. However, the 14-basis-point growth over the previous quarter is the weakest since 2022. This indicates that, while vacancies are still increasing, the rate of growth is moderating, implying a future plateau. For design and visualization teams, this backdrop is critical: as vacancy rates stabilize, tenant demand may shift toward personalized, visualized solutions that emphasize space possibilities.

Industrial Vacancy Rates on the Rise—But Stabilizing

Industrial Vacancy Rates on the Rise - The boom in warehouse development, which peaked at 711 million square feet under construction in late 2022, is gradually slowing. In the first quarter of 2025, only 65 million square feet were finished, the lowest since 2019. Developers are being cautious, pulling back new projects as the Federal Reserve's interest rate hikes reverberate through the market. This easing in warehouse development means that clients will expect more creative, design-forward ways to making available inventory stand out.

Aerial view of an expansive warehouse facility — Aerial perspective showcasing a large industrial warehouse complex.

Net Absorption Remains Positive

Despite rising vacancy rates, net absorption increased to 35 million square feet in Q1, four million more than the same period last year. This demonstrates a resilient industrial real estate market in which demand, while restrained, remains positive. This continued net absorption paves the way for visualizations and design studies that help lease buildings more quickly by displaying flexible configurations and future renovations.

Construction Pipeline Shrinks: What That Means

The present construction pipeline has fallen to 279 million square feet, and it is likely to decline to 250 million square feet by the end of the year. This contraction indicates a rebalanced supply-demand equilibrium. As the construction pipeline cools, pre-visualization technologies and digital storytelling become increasingly important in attracting investors, tenants, and stakeholders who want to comprehend a project's long-term worth.

Close-up of the storage shelves inside an industrial warehouse — Close-up view highlighting organized storage shelves in a warehouse environment.

Rents Are Up Despite Challenges

Even with high vacancy rates, asking rentals have risen 6% year on year. This reflects sustained confidence in the industrial real estate market. Higher asking rents justify marketing and development expenses in virtual tours, immersive design previews, and interactive space planning to enable premium leasing outcomes.

Wide angle view of sustainable building materials displayed in a warehouse — Wide angle view of a selection of sustainable construction materials in a warehouse display.

FAQ: Industrial Real Estate Trends

What's driving the increase in industrial real estate vacancy rates?

During the epidemic, a surge in warehouse development resulted in oversupply, which increased vacancy rates. However, completions are already dropping, indicating a period of stability ahead.

How is net absorption still positive despite greater vacancies?

While vacancy rates have risen, net absorption—the amount of space rented versus vacated—is still positive, indicating that tenant demand remains strong.

Why are asking rents going up despite more available space?

Rising asking rents reflect the value of well-located, modern apartments, as well as developers' ability to provide premium services that justify the cost.