Q3 2025 Warehouse Market Trends

What’s Happening Across the Supply Chain?

Global supply chains are constantly adapting to disruptions, changes in consumer demand, and more. Here’s the executive summary on what Flexe has been tracking and helping shippers respond to over the past quarter.

US Industrial Leasing Market⁽¹⁾

At a high level, the state of the US warehousing market can be visualized by tracking two numbers: Industrial Vacancy Rates and Annual Asking Rent per Square Foot, both national averages. These metrics are driven by important, underlying economic variables like trade volumes, retail inventories and sales, and industrial construction and sales, and in turn serve to indicate the overall direction of US warehousing supply & demand.

Industrial Vacancies & Rents

Summary

• Industrial vacancies rose 0.76% YOY and 0.18% QOQ. This marks twelve consecutive quarters of increasing industrial vacancies in the United States.
• Market asking rents increased 2.15% YOY and were unchanged from Q2 to Q3. Elevated vacancies will likely constrict rent increases in the near term.

Logistics Managers’ Index (LMI)⁽²⁾

Academic researchers in supply chain management build the LMI by surveying logistics leaders monthly on the 8 key measures of supply chain activity shown below. For Warehousing specifically, an industry whose costs for generations have literally been “behind closed doors”, the LMI offers a unique view into capacity, utilization, and ultimately, costs.

Summary

• The Logistics Managers’ Index (LMI) softened in November to 55.7, a decline from 57.4 in October and September.
• Warehouse utilization declined by 9 points to 47.5, this marks the first time in the 9-year history of the LMI index that this metric has contracted. This data strongly suggests that traditional, large-scale long-term leases may face headwinds as businesses prioritize flexibility.
• The sudden glut of unused capacity underscores a strong market opportunity for fractional warehousing solutions, enabling firms to access needed space on a flexible, short-term basis as they continue to digest bloated 2025 inventories without committing to long-term fixed costs.

The Cooling Economy

Soft Rents vs. High Operational Costs

Economic data points to a slowdown in the US economy, driven by private sector layoffs, falling consumer sentiment, and uncertain trade policy. The industrial real estate market clearly reflects this shift: nationally, industrial asking rent growth has fallen for the 10th consecutive quarter, while availability (sublet and direct) has grown for the 13th.

New construction starts have slowed, pushing sector-wide vacancy rates to 5.5% in Q3 2025 (up from 4.7% last year). Crucially, this decline in real estate costs has not lowered operational expenses.

Spot warehousing prices rose sharply between the second and third quarters, with average pallet storage costs climbing 4.4% and average handling costs rising 6.4%.

Data Center Demand

The New Industrial Real Estate Premium

Data center demand is booming, fueled by the adoption of Artificial Intelligence (AI) and the need for cloud computing infrastructure. Amazon’s $700 million land deal in Northern Virginia is one example of this massive site acquisition.

In a more relevant shift, Prologis, a real estate logistics leader, is exploring or has begun converting some of its logistics facilities into data centers. This adaptive reuse shows the industry’s critical need for ready-to-use properties with robust power and connectivity options, a competition logistics operations cannot easily win.

This trend of intense demand, site acquisition, and property conversion is expected to intensify through 2026.

Import Volumes

The Supply Chain Diversification Shift

Importers are proceeding with caution. In October 2025, U.S. container import volumes were nearly flat month-over-month and down 7.5% year-over-year. This decline reflects significant global changes in trading patterns driven by market volatility and shifting U.S. tariff policy.

Imports from China declined 16.3% year-over-year, even though they rose slightly (5.4%) from the previous month. Imports from India also fell 19% month-over-month. These changes reflect companies’ push to diversify sourcing.

While the Supreme Court is expected to rule by mid-2026 on the legality of the prior administration’s tariffs (IEEPA), companies are already altering their long-term supply chain plans. This is exemplified by General Motors (GM) setting a firm 2027 deadline for some suppliers to exit their China supply chains entirely.

(1) CoStar CRE (2) Logistics Managers’ Index