**Economic Uncertainty Takes Toll on Industrial Space Demand**
Economic uncertainty stemming from shifting tariff policies and persistently high interest rates is having a significant impact on industrial real estate, according to a recent report from the NAIOP Research Foundation. Only 27 million square feet of industrial space were absorbed in the first half of 2025, with demand falling by 11.3 million square feet in the second quarter—marking the first quarterly decline since 2010.
The NAIOP Research Foundation’s latest Industrial Space Demand Forecast projects that net absorption will remain nearly flat in the second half of 2025. However, the report anticipates a rebound beginning in the second quarter of 2026, with industrial space absorption expected to reach 119.3 million square feet in 2026 and 109.7 million square feet in 2027.
“Demand for industrial space is expected to recover somewhat after occupiers have time to adjust to a new tariff regime,” the report notes. “However, higher tariffs and slowing employment growth will likely result in slower demand growth compared to levels seen from 2020 to 2022 or during the six years leading up to the pandemic.”
