US Industrial Vacancy Narrows for New Large Properties

Large, new industrial properties are filling up as demand grows, while smaller logistics assets continue facing higher vacancies.

June 17, 2026

Nina Dale

Vacancy for US industrial properties over 500,000 SF is compressing as demand absorbs new supply, according to CoStar data.
Mid-size and small-bay properties are facing higher vacancies due to increased supply, especially in markets like Phoenix and Austin.
Shorter lease terms and uneven absorption highlight ongoing volatility across logistics and warehousing segments.

Key Takeaways

Newer Big-Box Space Drives Vacancy Compression

US industrial vacancy rates are tightening for properties over 500,000 SF, driven by robust demand for the largest and newest logistics assets. Business Wire reports that as of Q1 2026, build-to-suit deliveries and renewed appetite from large occupiers have helped push vacancy for this segment downward. Meanwhile, newer mid-size and small-bay industrial properties are experiencing a buildup in available space, reflecting uneven absorption trends across asset types.

Nationwide, large-scale logistics users have been active since late 2025, fueling absorption mostly through custom build-to-suit spaces. However, across the broader logistics market, vacancy rates tell a more nuanced story, as newer deliveries and regional supply gluts affect specific size categories differently.

Line chart showing vacancy trends for US logistics properties built within the last five years from 2006 to 2026. Vacancy rates for buildings over 500,000 SF decline in 2026, while mid-size properties between 100,000 and 500,000 SF reach the highest vacancy levels. Smaller properties between 10,000 and 100,000 SF show a gradual increase in vacancy.

Supply and Demand Diverge by Property Size

The US industrial landscape presents a tale of two markets: Large, new properties are seeing tightening availability, while vacancy climbs in mid-size and small-bay warehouses. According to CoStar, small-bay space (typically under 100,000 SF) maintains a vacancy rate of 6.4%, notably below the 10.9% average for the wider logistics sector—a sign of historically strong absorption and constrained construction. Yet, for new properties over 200,000 SF, especially at the mid-tier, supply is outpacing demand, leading to the highest vacancy levels in this cohort since 2006, except for the largest (over 500,000 SF) segment where absorption remains robust.

Leasing and Construction Volatility

Market dynamics illustrate a shift in tenant strategy. Juan Arias, national director of industrial analytics at CoStar Group, notes that average lease terms for the largest industrial spaces have declined from seven years in 2022 to five years in 2026. This trend reflects occupier concerns about supply chain disruptions and economic uncertainty, driving preferences for flexibility and shorter commitments.

Small businesses, contributors to small-bay demand, have pulled back on expansion amid macro volatility, moderating absorption for recent deliveries. Investors have also become more selective, as tenant-friendly conditions reshape leasing decisions across many industrial markets. Regionally, Phoenix and Austin have seen higher vacancy rates in the small-bay segment due to outsized new construction over the past few years, in contrast with tighter conditions in other markets.

Bar chart comparing small-bay industrial vacancy rates across major US markets in 2026. Austin leads with nearly 18% vacancy, followed by Phoenix at about 15%. Chicago and Cincinnati have the lowest vacancy rates, near 5%, while Omaha records the lowest level at roughly 2.5%. Figures cover logistics properties between 10,000 and 200,000 SF.

Why It Matters

These trends highlight the risks and opportunities in industrial development. Large, new properties continue attracting tenants. Major retailers and e-commerce firms have resumed expansion plans. As a result, developers still support large build-to-suit projects.

However, shorter leases show that occupiers remain cautious. CoStar reports average lease terms fell from seven years to five. This shift makes cash flow less predictable. It also increases turnover risk for landlords.

Meanwhile, smaller and mid-size assets face rising competition. Deliveries exceed tenant demand in some markets. Small business confidence is also weakening. As a result, new projects may face longer lease-up periods. Investors should recognize this split. Well-located big-box space still draws steady demand. However, speculative projects in Phoenix and Austin face more uncertainty.

What’s Next

Demand for the largest logistics facilities will depend on retailers and e-commerce firms. If economic pressures persist, demand gaps may widen. Shorter leases could also become more common. That would increase risks for owners outside the big-box segment.

CoStar will keep tracking vacancies, leasing activity, and construction. For now, flexibility remains valuable. Tenants and owners must adapt to a more complex industrial market in 2026.