CoStar Group Report Reveals Shifts in U.S. Industrial Property Market

In a recent press release dated June 16, 2026, CoStar Group Inc. unveiled significant developments in the U.S. industrial property market. According to the data provided, vacancy rates for newer industrial properties exceeding 500,000 square feet have been compressing, signaling a positive trend for larger logistics spaces. This contraction in vacancy rates is attributed to strong demand, as major logistics occupiers have returned to the market in the wake of the pandemic.

Juan Arias, the national director of industrial analytics at CoStar Group, emphasized the role of build-to-suit properties in driving absorption rates. "Large logistics occupiers have returned to the market since the latter half of 2025, and a significant amount of absorption was driven by the delivery of build-to-suit properties," Arias noted. This renewed interest in larger spaces has been particularly noteworthy, even as leasing activity has remained robust.

However, Arias pointed out that average lease terms have significantly declined from around seven years in 2022 to just five years today for the largest leases. This shift reflects a changing landscape characterized by supply chain volatility, evolving trade dynamics, and fluctuating consumer demand. Tenants are increasingly opting for shorter lease terms, providing them with greater flexibility to adapt their operational footprints as market conditions evolve.

The report also highlighted the variability of vacancy rates across different property sizes and regions. For instance, small-bay properties currently have an overall availability rate of 6.4%, which is notably lower than the broader logistics market vacancy rate of 10.9%. Despite steady leasing activity and historically limited construction in this segment, the prevailing economic uncertainty has impacted small-business expansion plans over the past year, thereby influencing demand for newly delivered spaces.

Among major markets, Phoenix and Austin stand out due to their recent influx of small-bay supply, which has resulted in higher vacancy rates for this specific segment.

CoStar's analysis indicates that properties built in the last five years and larger than 200,000 square feet are experiencing a slower absorption rate, particularly in the mid-sized category. The vacancy rates for these new logistics properties are currently at their highest levels since 2006, with the exception of the largest property segment exceeding 500,000 square feet.

The combination of increased supply and economic uncertainty presents a complex challenge for smaller businesses and mid-sized properties. As demand remains tepid in this segment, it raises questions about future construction projects and the overall health of the industrial property market.

CoStar Group’s latest findings offer a nuanced perspective on the U.S. industrial property market, highlighting both opportunities and challenges as the landscape continues to evolve. With larger properties poised for growth and small-bay spaces facing headwinds, stakeholders in the commercial real estate sector will need to navigate these dynamics carefully.

As CoStar Group continues to serve as a leading provider of real estate information and analytics, their insights will be crucial for understanding market trends and making informed business decisions. For more information about CoStar Group and its offerings, please visit their official website.