US industrial starts down 25%

U.S. industrial construction is no longer expanding at the pace it did during the 2021-2023 surge. Cushman & Wakefield said the national industrial pipeline has been shrinking after peaking above 716 million square feet in the third quarter of 2022, as higher interest rates and softer occupier demand cut into new starts. JLL said 259.5 million square feet was under construction nationally in the first quarter of 2026, with new starts remaining relatively flat. That pullback matters because industrial supply does not arrive evenly. Developers are still building, but they are doing it more selectively, with more emphasis on modern buildings, pre-leasing and build-to-suit projects rather than broad speculative waves. Cushman & Wakefield said 52% of the square footage built in 2023 was still available for lease when demand moderated, helping explain why starts slowed. (cushmanwakefield.com) ### Why does a drop in starts matter if vacancy is already higher? National vacancy is no longer at the ultra-tight levels of the pandemic boom, but construction has already started to reset. JLL said U.S. industrial vacancy held at 7.5% in the first quarter of 2026 and is expected to trend down as existing supply is absorbed and new starts remain limited. In the Inland Empire, that reset is visible in local data. (cushmanwakefield.com) Kidder Mathews said vacancy reached 6.0% in the second quarter of 2025 after a wave of deliveries, while developers slowed new starts and prioritized “quality over volume.” The firm said demand remained for specialized space such as cold storage and last-mile logistics even as older, less adaptable facilities came under pressure. (jll.com) ### Why are cold storage and last-mile projects colliding on the same sites? Los Angeles is an infill market with limited land and heavy demand near ports and population centers. Link Logistics said demand in Los Angeles is shaped by port-driven logistics, last-mile distribution and advanced manufacturing, all competing in a supply-constrained geography with dense population and limited land availability. The company said logistics-related users accounted for roughly two-thirds of the top 25 industrial lease deals in Los Angeles by square footage in the fourth quarter of 2025. (kidder.com) The Port of Los Angeles and the Port of Long Beach remain the freight anchors for that competition. Both ports continue to publish monthly container volumes, and Ontario International Airport said on May 21 that April cargo tonnage rose more than 5% from a year earlier and 8% year to date. Those freight flows help explain why developers still want sites close to Los Angeles, Long Beach and Inland Empire transportation corridors even as overall starts cool. (linklogistics.com) ### Does cold storage really earn a premium over a dry warehouse? Cold storage has a different cost structure from standard dry-box industrial. CBRE said cold-storage construction costs average two to three times those of a traditional dry warehouse because of insulated panels, refrigeration systems, specialized slabs and multiple temperature zones. CBRE also said land constraints are pushing taller cold-storage designs with 50-foot-plus clear heights. (portoflosangeles.org) That does not automatically settle the land-use debate in infill Southern California. On scarce sites, developers still have to decide whether higher construction costs and narrower tenant pools are offset by stronger rents, stickier users or better long-term pricing than conventional logistics space. The public market reports reviewed here document demand for both cold storage and last-mile product, but they do not provide a universal rule that cold storage always outbids dry-box development on constrained infill land. (thescxchange.com) ### What does this mean for Southern California supply over the next year? Fewer starts today usually mean less new speculative competition later. Cushman & Wakefield said the pipeline reset followed four years of record deliveries, and Kidder Mathews said few Inland Empire projects were seeking city plan approval in early 2026, though smaller projects could pick up later in the year. (kidder.com) The next read on whether that tightening is real will come from second-quarter and midyear 2026 industrial reports from national brokerages and local market trackers. Those updates should show whether starts remain constrained, whether infill land competition intensifies in Los Angeles and Long Beach, and whether cold-storage developers keep winning sites that might otherwise have gone to conventional last-mile warehouses. (jll.com) (cushmanwakefield.com)