The U.S. industrial sector is projected to move toward a more balanced footing over the next several years, with a potential inflection point emerging in late 2027, according to a recent outlook from CoStar. The firm reports that national vacancy is expected to drift slightly higher through the early part of 2027 before reversing course as demand gradually firms.
Entering the third quarter of 2026, the national industrial vacancy rate is holding in the mid-7% range. CoStar anticipates a modest uptick from that level in the near term, reflecting continued elevated availability and the residual effect of a construction wave that has added significant new space to the market. That near-term softness is not expected to persist, however, as the forecast calls for vacancy to begin a steady descent later in the outlook period.
CoStar notes that its current view represents a modest improvement from its previous forecast. Stronger-than-anticipated tenant demand in recent quarters has translated into an upward revision to near-term net absorption, which in turn supports a slightly lower vacancy trajectory than previously expected. This adjustment signals that users of industrial space have continued to expand, even as new supply has come online.
Despite this relatively constructive demand picture, CoStar emphasizes that market participants should not expect sharp rent gains in the immediate future. Juan Arias, national director of industrial analytics at CoStar Group, points to elevated availability and a lingering supply overhang as key factors likely to restrain rent growth in the near term. Leasing volume remains healthy, but landlords are operating in a competitive environment that tempers pricing power while the market works through recently delivered inventory.
Arias indicates that conditions are forecast to improve meaningfully by late 2027 as the development pipeline tapers and demand continues to firm. With construction activity slowing and tenant requirements holding up, CoStar expects net absorption to begin outpacing new deliveries toward the end of the forecast horizon. That shift would mark a turning point for industrial fundamentals, as excess space is gradually absorbed and the balance between supply and demand tilts back in favor of landlords.
In line with these dynamics, CoStar has revised its rent projections upward. Average annual rent growth across the 2026–2027 period is now expected to come in at 1.9%, reflecting the combination of modest near-term gains followed by firmer conditions as supply and demand move closer to equilibrium.
