CoStar Group Forecasts U.S. Industrial Vacancy to Peak in Early 2027

Entering the second quarter of 2026, the national industrial vacancy rate hovers around the mid-7% range. This figure is expected to climb slightly as the market transitions into 2027, before experiencing a gradual decline. This updated forecast indicates that the anticipated vacancy rate will be higher than previous estimates, reflecting a nuanced understanding of market dynamics. The demand for industrial space in 2027 is predicted to surpass 2026 levels but will fall short of earlier forecasts.

CoStar's analysis also reveals a downward adjustment in average annual rent growth for the period spanning 2026 to 2027, now forecasted at just 1.6%. This estimate comes in light of short-term downward pressure on rents, with expectations for a slower recovery that may bring annual growth closer to 2% by late 2027.

Juan Arias, CoStar's National Director of Industrial Analytics, commented on the current state of leasing activity, noting, “While leasing activity for industrial space has held up better than initially expected, the recovery path continues to lengthen as stabilizing demand struggles to fully absorb the new space delivered over the last four years.” Arias also highlighted that a moderation in new supply expected by early 2027 could catalyze a significant inflection point in vacancy rates and rejuvenate rent growth during the latter half of that year.

Despite the cautiously optimistic outlook, Arias underscores that risks to the forecast remain skewed toward the downside. Key factors that may continue to challenge the market include volatility surrounding U.S. trade policies, relentless increases in tenant operating expenses, and potentially subdued consumer spending on goods. Each of these factors could weigh heavily on industrial tenants' expansion decisions.

Conversely, there is a silver lining. If inflation eases and consumer confidence rebounds, the potential for absorption and rent growth within the industrial property sector could exceed current expectations, offering a glimmer of hope amidst the ongoing challenges.

CoStar Group, publicly traded under NASDAQ: CSGP, has established itself as a cornerstone in the commercial real estate sector. Founded in 1986, the company provides a wealth of data, analytics, and insights through its various platforms, including CoStar, LoopNet, Apartments.com, and Matterport, among others. The company’s commitment to transforming the real estate industry through innovative technology is evident, as it attracted over 131 million average monthly unique visitors in the first quarter of 2026.

With its headquarters in Arlington, Virginia, CoStar continues to empower stakeholders in the real estate market, facilitating improved decision-making through comprehensive market intelligence.

As the industrial real estate landscape evolves, stakeholders will be keenly observing CoStar's forecasts and analyses to navigate the complexities of supply, demand, and economic influences affecting the industry.