Industrial Real Estate Holds Its Ground — Phoenix and Houston Stand Out

Cushman & Wakefield’s Q3 2025 Industrial MarketBeat reports that U.S. industrial absorption climbed to 45.1 million sq ft, up 30% from the prior quarter, while vacancy held steady at 7.1% and rents rose 1.7% year-over-year. Nationally, supply is finally normalizing after years of elevated construction. In our focus markets, Phoenix saw vacancy dip to 13.1% as new deliveries slowed, and Houston maintained a low 6.3% vacancy with rents up 4.1% year-over-year—both signaling healthy demand and disciplined supply pipelines.

Our Take

The latest data point to a steady industrial sector that’s adjusting to higher borrowing costs and slower rent growth, yet still showing solid tenant demand. For private market investors, this balance suggests a shift from rapid expansion toward a more sustainable growth phase. It also reinforces the idea that well-located, institutional-quality assets in growth markets continue to command a premium, even as capital becomes more selective.

In Phoenix, the modest drop in vacancy and limited new supply indicate the market is working through its recent oversupply. For buyers and lenders, this reduces downside risk—especially for newer, well-located facilities that continue to attract tenants. Investors should still model moderate rent gains and focus on high-quality assets, as older buildings face longer lease-up times and higher incentives.

Houston, meanwhile, continues to show some of the strongest fundamentals in the country. A tight vacancy rate, consistent rent growth, and improving absorption all point to stable cash flow potential. With 15 million sq ft still under construction, the pipeline bears watching, but demand appears sufficient to absorb new space without major pricing pressure.

Overall, industrial real estate remains one of the most resilient asset classes heading into 2026. Phoenix and Houston exemplify markets where demographic growth, logistics infrastructure, and controlled supply support long-term investor confidence. For underwriting, the current environment favors quality over quantity—stable rent assumptions, conservative exit caps, and selective market positioning are likely to outperform in the next cycle.

Source: Marcus & Millichap Q3 U.S. Industrial MarketBeat Report

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