U.S. industrial real estate is entering a new phase, as rent growth across warehouse properties has slowed sharply and, in some cases, turned negative. According to recent data from CoStar Group, asking rents are now declining or flattening across all major size categories, marking a clear break from the sector’s multi-year expansion cycle.

The most pronounced shift is occurring in large-format logistics facilities. Properties exceeding 50,000 square feet have seen rent growth fall from a compound annual rate of 8.8% in 2019 to a current annual decline of approximately 2.7%. This reversal reflects reduced activity from large-scale occupiers and a growing supply of bulk distribution space.

Mid-sized industrial properties—ranging from 25,000 to 50,000 square feet—have also experienced a significant slowdown. Previously posting growth rates above 6%, rents in this segment are now largely flat, as increased supply has introduced more competition for tenants across multiple markets.

Smaller industrial assets, particularly those under 25,000 square feet, have shown more resilience but are no longer immune to the broader trend. Rent growth in this category has declined from over 5.5% to below 1%, indicating a meaningful deceleration even in segments that previously benefited from limited supply.

Regional variation remains a factor. Larger leases continue to perform more favorably in certain markets—particularly in mountain and northeastern regions—where supply growth has been more constrained. However, across most regions, the increase in available space has shifted leverage toward tenants.

Demand patterns are also evolving. Large occupiers have pulled back from major leasing decisions, with fewer large-scale transactions taking place. According to market participants, leases exceeding one million square feet are expected to remain limited until broader economic conditions improve.

At the same time, smaller-format industrial properties—often referred to as shallow-bay warehouses—continue to see relatively stronger demand. These properties, typically under 50,000 square feet and serving local distribution and light industrial users, have experienced sustained rent growth over the past decade, with current rent levels significantly higher than historical benchmarks.

However, even this segment is beginning to moderate, as smaller businesses face increased economic uncertainty and more supply gradually enters the market.