The industrial real estate market in 2025 is characterized by disciplined optimism, as investors and developers recalibrate their strategies to adapt to a landscape shaped by higher interest rates, selective capital deployment, and evolving tenant demand. The sector, long buoyed by robust fundamentals and strong demand drivers, is now navigating a period where caution and precision have replaced the exuberance of recent years.
This nuanced outlook emerges from a panel discussion with three regional industrial market experts from Colliers: Gian Bruno representing the West, Alex Cantu for the Midwest, and Jimmy Ullrich for the Southeast. Their perspectives reveal how national trends are playing out differently across regions, but all point to a market that is both resilient and increasingly selective.
Investors have largely accepted that the era of ultra-low interest rates is over, and most have adjusted their expectations accordingly. The Federal Reserve’s stance on maintaining higher rates has forced a shift in strategy, with many investors now targeting value-add opportunities and focusing on assets in prime locations.
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In the West, for example, Bruno notes that investors are zeroing in on mark-to-market value-add assets, but are highly attuned to submarket fundamentals and tenant rollover risks. There is also a growing interest in long weighted average lease term (WALT) properties, as investors seek stability and predictable cash flows in an uncertain environment.
In the Midwest, Cantu observes that the most actively traded assets are Class A and B properties under 500,000 square feet with pre-2021 lease rates and sub-5-year WALTs. The re-emergence of core and core-plus capital is a testament to the region’s appeal for investors seeking low-volatility, long-term credit-backed assets. Cantu anticipates increased selling activity compared to the past two years, as rental rate growth helps offset higher cap rates and enables deals to pencil out despite ongoing interest rate volatility.
Meanwhile, in the Southeast, Ullrich describes a shift in investor focus from short-term, mark-to-market plays to long-WALT assets with strong credit. This pivot reflects a broader desire for stability and a hedge against economic uncertainty. Ullrich also notes that, as the construction pipeline shrinks and occupancy levels stabilize, capital is beginning to reemerge for new development projects, particularly in high-growth markets. Momentum for select developments, including build-to-suit projects, is expected to accelerate through 2025.
Across all regions, development activity has slowed as investors and developers wait for existing supply to be absorbed and for market conditions to normalize. While some Midwest cities may see new projects backed by third-party capital in 2025, a return to pre-pandemic development volumes is not expected until late 2026 or beyond. In the West, speculative projects remain on hold pending further absorption, while the Southeast appears poised for renewed development as fundamentals improve.
Ultimately, the industrial capital markets in 2025 are defined by a more selective but competitive investment landscape. Liquidity is expanding, but the investment aperture has narrowed, with investors prioritizing resilience, quality, and adaptability. For those able to identify the right assets in the right markets, competition remains fierce and pricing strong. The long-term outlook remains positive, but success will depend on disciplined execution and a deep understanding of both macroeconomic forces and local market dynamics.
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