The U.S. warehousing and fulfillment sector is at a critical juncture, according to the Q2 distribution and fulfillment study from ITS Logistics. On the surface, capacity appears steady, but a closer look reveals that ready-to-occupy, logistics-ready space aligned with modern requirements is becoming harder to find. At the same time, rising costs are making investment decisions more sensitive, as companies weigh risks more carefully.
ITS Logistics emphasized that shippers and industry providers must now reassess their network flexibility, inventory strategies and capital allocation. The firm projects that by the latter half of 2025, a confluence of seasonal inventory building, robust consumer demand and high rates of pre-leasing will further restrict the amount of available, usable space.
Even as vacancy rates have climbed to 7.1%—the highest since 2014—the total warehousing capacity has actually contracted for the first time since early 2023. This paradox is being driven by a surge of 71.5 million square feet in new warehouse deliveries, marking the fifth straight quarter of increasing completions. Despite this influx, well-located, high-efficiency warehouses remain in high demand, keeping prices elevated and utilization rates strong.
Data from Cushman & Wakefield quoted by ITS Logistics shows average asking rents climbed to $10.12 per square foot, up 0.9% from the previous quarter and 2.6% compared to the prior year. Major logistics hubs such as Dallas/Fort Worth and Chicago continue to see positive absorption, while secondary markets have seen some softening in activity.
Major investors are moving decisively to capitalize on these market trends. Prologis, for example, has invested $900 million into new development projects, with about 65% of these described as build-to-suit and already pre-leased before construction.
“This is the strongest it’s been in my career,” said Prologis Chairman and CEO Hamid Moghadam in a recent earnings call, highlighting the company’s confidence in its development pipeline.
Meanwhile, Brookfield Asset Management recently acquired 53 industrial assets for $428 million. The move underscores investor belief in the sector’s strong long-term fundamentals.
ITS Logistics concluded that the increase in vacancies, alongside steady rents and vigorous pre-leasing activity, signals not a weakening market, but one undergoing adjustment. In this environment, companies are emphasizing functional space, operational readiness and alignment with tenant needs.
“Today’s environment offers a narrow but good opportunity to lock in quality space before the market tightens again later this year,” the company said.
Source: “Higher Vacancy But Fewer Options: Warehousing Faces New Squeeze”
