Despite the speed bumps of tariffs, rising costs and the war in Iran, demand for industrial space remains solid, largely due to investment in supply chains and distribution networks, according to a new report from CommercialCafe, a subsidiary of Yardi Systems.

Signs of strength include a 32% year-over-year rise in the construction pipeline, from more than 338 million square feet in August 2025 to nearly 447 million square feet in August of this year.

As of August, year-to-date industrial sales were up 40% to nearly $60.5 billion. Average leasing rates that month were up 5.4% from a year ago, with industrial rates in the crucial Inland Empire area of California increasing nearly 7% over the same period. 

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Developers are continuing to build new industrial spaces despite rising capital and construction costs. Factors such as increasing vacancies and slowing rent growth, however, have led to a slowdown in building speculative projects.

That pullback, CommercialCafe writes, was probably inevitable in light of the industrial sector having to work through its largest oversupply in history after the construction of 1.5 billion square feet of new property between 2020 and 2022. Future projects tied to cross-border manufacturing or those with elevated energy costs are most likely to face challenges in the future.

On the positive side, Sun Belt markets, ranging from Atlanta to the Inland Empire, continue to overperform, despite the historic levels of construction growth in recent years. The region continues to experience strong rent growth and modest vacancy increases despite more construction in the pipeline.

“Faced with a number of potential disruptions and headwinds, the industrial market continues to be impressively resilient, as it enters a growth phase following the construction boom of the early 2020s and the absorption lag that followed,” Peter Kolaczynski, director of Yardi Research, said in a press release.

In-place rents for U.S. industrial spaces averaged $9.31 per square foot in August, up 6 cents from the previous month and 5.4% from a year ago. The national vacancy rate in August was 9.3%, the same as July and up 60 basis points from August 2025.

Atlanta had the highest in-place rent growth, rising 7.9% year over year. New Jersey and Miami each saw growth of 7.6% in the past year, while Dallas enjoyed a 7.5% increase.

Sun Belt cities dominate the list of metropolitan areas with the most industrial space under construction. Dallas leads with 37.3 million square feet of new construction in the pipeline. Next is Phoenix with 31.1 million square feet. Houston is third with 21.8 million square feet. Atlanta and Chicago are in a tie for fourth place, each with 17.1 million square feet.

As for industrial transactions, Dallas — once again — leads the list by a large margin, with just over $4 billion in year-to-date sales. Second is Chicago with about $3.2 billion in sales. Houston is third with $2.7 billion, and Los Angeles is fourth with $2.6 billion.