While industrial rents peaked between 2021 and 2023, industrial real estate now enters 2026 almost in free-fall. Industrial landlords and their brokers have been pulling the wool over commercial tenants’ eyes for too long, publishing asking rents that haven’t changed materially since 2023, or not posting rents at all with listing asking prices shown as “withheld” or “negotiable.” But things have in fact changed, and not just on the margin, but radically with how much industrial space is on the market nationally.
The chart below compares industrial availability in the major U.S. industrial markets from January 2020 against January 2026—the screaming red lines show the greatly inflated supply conditions that we find ourselves in today. Often, landlord listing brokers’ reporting presents quarter-over-quarter numbers that make “vacancy” increases look nominal, but don’t include sublease space, space on the market for lease but not yet vacant, or buildings under construction in their numbers. If you look back to Hughes Marino’s industrial market reports as early as 2023, we predicted that all this was coming…and it’s even worse than we thought it would be.
The above chart illustrates how all of the major industrial markets have boomeranged over the last six years, with every market starting 2026 dramatically higher than 2020 began. Dallas, Denver, Atlanta, Phoenix and Boston are at 150% of their 2020 level; Salt Lake City and the California markets of San Diego, Los Angeles, Inland Empire and San Francisco are all double their 2020 starting points; and Seattle, Raleigh-Durham and Orange County, California, started 2026 higher at 225%, 237% and 241% respectively. Only Chicago at a 19% increase, Houston at 22% and Charlotte at 38% have not been overwhelmed by new construction sitting vacant, subleases languishing on the market and second-generation space coming back to market due to massive downsizings. Commercial developers that have added 1,200,000,000 SF (yes, 1.2 billion SF) could not reasonably expect that they could build what normally would occur over decades in a few years and there not be consequences…but here we are.
Sublease Space Drags Down the Market
While much of the spike in availability is driven by the excessive amount of new construction nationally, businesses are also retrenching due to overcommitments made between 2021 and 2022. Along with tenants responding to the slowdown of imports in 2025, this has dumped historically high amounts of sublease space on the market throughout the country. Industrial sublease equilibrium over the last few decades has been in the 100M SF range, normally the result of M&A and business changes. The second half of 2022 saw early warning signs of a coming storm for industrial real estate that most landlords, developers and landlord brokers ignored. Sublease inventory then picked up wind in 2023 through 2024, blowing through all historic ceilings. We enter 2026 with a record 278M SF of warehouse and manufacturing space on the market for sublease, which is higher than the 2023 Covid-peak of office space for sublease at 252M SF. By comparison, today there is 100M SF more industrial space on the market in the U.S. than there is office space…and you thought office space nationally was soft!
The Worst is Yet to Come…for Building Owners and Their Brokers
Landlords and their promoting landlord listing brokers are just starting to understand how bad this is, as the downturn has whipsawed them as fast on the way down as the 2020 to 2022 demand explosion did on the way up. Stuck with overpaying for their land and purchasing industrial buildings at record-high prices, many are saddled with promises to lenders and investors that they cannot meet. We are already seeing private owners with low debt levels drop rents and offer massive free rent packages, but the institutional players are locked into a time warp and are struggling to respond to the quickly downward-moving market.
The biggest problem in the market today is that tenants don’t know their bargaining power and often use the landlord’s broker, work directly with the landlord based on some generally flimsy “relationship,” or use some other landlord’s broker to go to market. Riddled with conflicts of interest, steering tenants to broker-preferred outcomes, or simply not understanding the macro market conditions they are operating in today, many brokers get tenants into bad deals. Sadly, there is little transparency in commercial real estate markets, and brokers often revert to “comps” (comparable leases recently signed) to show a tenant what a good deal looks like. But this “followers following followers” is like the old story of the clockmaker setting his clocks to the church bells, and the church bell ringer setting their watch to the watchmaker’s store clocks! Landlord brokers report their collective mediocre leasing results as market information, with statistics bent to the landlords’ benefit, and have little incentive to push back on any of it.
And the Best is Yet to Come…for Tenants
May this be the year that the business owners and executive teams that own and run distribution, 3PL and manufacturing companies take their power back. But to do so, they have to do something differently to expect different results. That something different is to stop trying to do it yourself, or using landlord listing brokers, or purported “tenant reps” that work at landlord “full service” shops, and engage an actual independent tenant advocate that will lead this effort for you and your company’s bottom line.
Market statistics provided by CoStar Group.
