Functional Warehouse Space Tightens Amid Highest Vacancy Rates Since 2014

The Q2 ITS Logistics US Distribution and Fulfillment Index, powered by Cresa, underscores a tightening market for functional, operationally ready warehouse space, despite stable overall capacity on paper. With vacancy rates climbing to 7.1%, the highest since 2014, and warehousing capacity contracting for the first time in over a year, shippers, retailers, and logistics providers face mounting challenges. The index highlights a surge in inventory costs to 80.9 on the Logistics Manager Index, the highest in over two years, driven by elevated labor, storage, and insurance expenses.

Ryan Martin, President of Distribution and Fulfillment at ITS Logistics, emphasizes the urgency for securing viable space, noting the expected intensification of capacity and cost pressures with seasonal inventory builds and consumer demand. The index findings reflect broader industrial market trends, including a drop in new completions to a five-year low and the slowest growth in average asking rents since early 2020, as reported by Cushman & Wakefield.

The Logistics Manager Index averaged 59.4 in the second quarter, indicating continued expansion, yet warehousing capacity fell to 47.8 in June, marking its first contraction since early 2023. The index also notes a significant decrease in import volumes and reduced activity at fulfillment and retail nodes, following tariff-driven stockpiling surges earlier in the year.

Additional insights from the index include a nearly 20% month-over-month drop in U.S. goods imports in April, the largest single-month decline since 1992, and a 40% to 50% increase in average warehouse wages over the past five years, spurring interest in automation. Core markets such as Dallas-Fort Worth, Chicago, and New York/New Jersey continue to experience steady rent growth despite elevated vacancy rates.

For a comprehensive overview of the index and forecasts for the U.S. distribution and fulfillment sector, visit ITS Logistics.