The industrial real estate sector posted a strong first quarter of 2025, with 123.3 million square feet of space being leased, according to a report from JLL.
The U.S. Industrial Market Dynamics report for the first quarter of 2025 found that industrial absorption and leasing improved in the first three months of the year despite the headwinds of trade tensions, rising prices and escalating economic uncertainty.
Leasing activity showed a strong preference among companies for mid-sized facilities. Leases for spaces ranging from 100,000 square feet to 250,000 square feet were a main driver of market activity, accounting for 27.3% of total leasing volume.
The vacancy rate for industrial spaces climbed to 7.3% during the quarter, up 20 basis points from the previous quarter due to ongoing deliveries of unoccupied industrial space. At the same time, the increased leasing activity in the first quarter led to net absorption jumping 43.4% year over year as 40 million square feet were absorbed.
New industrial deliveries for the quarter were at 79.6 million square feet, unchanged from the previous quarter. The development pipeline contracted to its lowest point since 2015, decreasing 29.9% year over year to 253.2 million square feet. Of this total, 86.7% is anticipated to be delivered in 2025.
The JLL report found that the average manufacturing building in the U.S. is more than 50 years old and there is an urgent need for modernization. This is evident by the current construction pipeline, where manufacturing buildings now make up 16% of planned projects, up from 14.2% one year ago.
