Industrial Development Slows in 2025 But Manufacturing Expected to Grow: Report
By Isabelle Durso February 27, 2025 4:30 pm
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Industrial development in the U.S. is off to a slow start in 2025, but that could change thanks to a manufacturing expansion expected to boost numbers soon, according to a new report from Yardi’s CommercialEdge.
Across the country, 346.2 million square feet of industrial space was under construction as of January, down from 349.6 million square feet the previous month, the report found. The 346.2 million square feet of new space represents about 1.7 percent of the total stock of industrial space in the country.
Vacancy rates for industrial space in the U.S. remained stagnant month-over-month, at a national average of 8 percent, according to the report.
However, manufacturing space expanded greatly since the beginning of the decade, with more than 100 million square feet of manufacturing space delivered since 2022 and another 100 million square feet in the pipeline, the report found. And that’s expected to grow more in the future.
Under former President Joe Biden’s administration, the federal government approved billions of dollars in incentives for the production of electric vehicles (EVs) and batteries, as well as computer chips and clean energy technology, according to the report.
Manufacturing facilities for those purposes are expected to spur millions of square feet of new space. For example, Hyundai is building a $5.9 billion, 17 million-square-foot EV plant near Savannah, Ga., the report said.
“It’s not only the initial boost in activity that we see by these semiconductor, EV and battery super projects, but the supportive projects downstream that have helped buoy the construction pipeline and economic impact of the primary development,” Peter Kolaczynski, director of CommercialEdge, said in a statement.
Still, manufacturing is expected to face several challenges in the near future from limited location selection, land availability, access to power and water, and skilled labor.
In addition, potential tariffs under President Donald Trump’s administration “threaten to disrupt the manufacturing sector” and “ignite a trade war and trigger retaliatory tariffs that could jolt manufacturers,” the report said.
But there was some good news for industrial transactions in 2024, as they increased from $52 billion in 2023 to $69.2 billion nationwide last year, according to the report. Industrial property prices in 2024 averaged $129 per square foot.
Texas’ Dallas-Fort Worth area saw the most industrial transactions in 2024, with sales totaling nearly $6 billion, while Phoenix was the most active market for industrial development with 17.7 million square feet under construction as of January, according to the report.
Isabelle Durso can be reached at idurso@commercialobserver.com.