Investors Bullish on Industrial REITs

The broader industrial real estate sector is witnessing a recalibration after a period of intense rent growth. Nationally, average rents surged by 50% between 2021 and 2023, with markets like California's Inland Empire seeing even steeper increases. While asking rents have since softened from their peak, the performance of industrial REITs is up 23% year-over-year, significantly outpacing the 3% average growth of all other REIT sectors. In the key logistics hubs of the Inland Empire and Los Angeles, the market dynamics are shifting. The Inland Empire's vacancy rate climbed to 7.2% in the fourth quarter of 2025, with average asking rents stabilizing around $1.00 per square foot (NNN), a 10.7% decrease year-over-year. Meanwhile, Los Angeles ended 2025 with a vacancy rate of 4.3% and an average asking rent of $1.43 PSF/Mo (NNN), down 4.0% from the previous year. Despite a cooling phase, demand from third-party logistics (3PL) providers and e-commerce remains a primary driver for industrial space. E-commerce companies accounted for nearly a quarter of all new warehouse leasing in 2026. Prologis research indicates that for every 1% increase in e-commerce's share of retail sales, an additional 50 to 70 million square feet of industrial space is absorbed. A significant slowdown in new construction is expected to tighten the market. In the Inland Empire, new construction starts have plummeted by over 50%, signaling a potential "supply gap" by late 2026. This reduction in the development pipeline, with completions expected to remain low through 2025, is setting the stage for vacancies to decline and rent growth to resume. STAG Industrial has been an active buyer, acquiring 32 buildings for $682.4 million in 2024 and another three buildings for $43.3 million in the first quarter of 2025. The company's strategy focuses on well-located assets in both primary and secondary markets to capitalize on the sustained demand from logistics and e-commerce. More recently, STAG acquired a large manufacturing plant near Kansas City. Looking ahead, major players like Prologis are optimistic, forecasting a market upturn with improving net absorption and occupancy through 2026. The company achieved record lease signings of 228 million square feet in 2025 and anticipates net absorption to reach 200 million square feet in 2026, which is expected to reduce national vacancy rates. This suggests a window of opportunity for tenants to secure favorable lease terms before inventory tightens.