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“Generally speaking, relative to a historical perspective, the industrial market in the United States is still on solid footing. Fundamentally, we are not on a par with 2020 to 2022, but what we’ve been doing over the past three years is adjusting back to a more traditional environment.”
- Jeff Thornton, CenterPoint's EVP, Central Region
CenterPoint’s EVP, Head of Central Region, Jeff Thornton, was among the industry experts interviewed by CRE Connect.
Read what Jeff had to say about how the U.S. industrial sector normalized in 2025 after the extraordinary growth of 2020–2022, how demand, tenant requirements, rent growth, and supply dynamics have shifted, and the key risks and opportunities shaping the outlook for 2026.
Connect CRE: How did industrial fundamentals evolve in 2025 compared to the high-growth years of 2020–2022? Did demand soften?
Jeff Thornton: Generally speaking, relative to a historical perspective, the industrial market in the United States is still on solid footing. We are certainly not, from a fundamental standpoint, where the market was in 2020 to 2022. The market has clearly slowed—even in some of the most active industrial markets, absorption has been more than cut in half. There’s been a meaningful reduction in absorption across all markets. This slowdown started in early 2023, and we’ve had enough time for supply to slow down and constrict, so we’re not continuing to add to the oversupply and are truly able to digest some of the oversupply, particularly in these larger markets.
Fundamentally, we are not on par with 2020 to 2022—almost everyone I talk to wishes we were—but we feel like we have adjusted back to a pre-COVID activity level, which still puts us on a solid foundation from a historical perspective. The COVID and post-COVID era was a unique period, and what we’ve been doing over the last three years is adjusting back to a more traditional industrial environment.
Did tenant requirements shift in 2025? (e.g., size preferences, automation, location strategy). Are tenants still looking to expand?
In 2025, tenants really experienced a lot of handwringing as they tried to lease space in line with their business projections for the next year, two years, three years, five years. Their crystal ball for making projections was cloudy. Tenants had a harder time understanding from a mid- to long-term perspective how much space they needed and where it needed to be. This created a delay in decision-making and a desire to do shorter-term deals to gain flexibility, allowing them to tweak size requirements and location over the next couple of years as their outlook becomes clearer.
How was rent growth in 2025, particularly in overbuilt markets? What are you seeing for rent growth in 2026?
In the top ten performing submarkets, rent growth continued to increase even in the face of a little bit of oversupply and reduced absorption, although absorption was still positive. Even though absorption was not at the same level as in 2022, we still saw rent growth in the top 10 to 15 industrial markets around the country.
Has investor appetite for industrial remained strong, even amid rate uncertainty? What is the status of valuation and cap rates, and where are they likely to go next year?
Investor appetite for industrial has remained strong throughout 2025 and going into 2026. So much so that, according to Green Street, there’s a feeling by some institutions that the high demand has driven cap rates to a lower point than is justified, and industrial assets may be overvalued by as much as 10%. Effectively, a lot of capital continues to chase industrial, driving values probably a little bit higher than where they should be at the moment.
Are reshoring, nearshoring, and supply-chain diversification impacting demand? In what ways?
Yes, it certainly has. Since Liberation Day, there has been about a four- to five-month lag where tenant decision-making has been slow, and we have seen a slowing of new deals being signed for renewals and expansion. After about four months, the market came to understand where we are, and tenants knew they needed to start making decisions. Leases started to happen, absorption started to happen again, and I believe the need for more space to accommodate reshoring, nearshoring, and supply chain diversification is real. This need will likely show up in true port markets like Southern California, Savannah, New York/New Jersey, Houston, and also in inland port areas like Dallas, Houston, Chicago, and Atlanta.
What is the construction/supply outlook for the sector? Will the markets start to rebalance?
Construction volume was at about 50% in 2025 compared to the year before, so there’s been a meaningful slowdown in new development and construction delivering new supply. Some markets tied around major population bases and transportation hubs have continued to grow—Houston, Dallas, Atlanta, Chicago, and Washington, DC fit that mold. Each of those markets could say they’re a little bit oversupplied at the moment, but absorption has continued to be positive in those larger markets, allowing them to digest the oversupply while continuing to add some supply.
What are some headwinds or risks you foresee in 2026 (e.g., oversupply, consumer spending shifts)?
Headwinds include oversupply in non-major markets, uncertainty around macroeconomic policies in the United States, and the geopolitical environment globally. We don’t know what those things will look like this year, and that uncertainty creates a problem, which is effectively the headwind.
What’s your overall outlook for the sector next year?
Our projection is that things will start to improve in 2026. However, current concerns around geopolitical issues, the continued effect of Liberation Day and the trade war with high tariffs, and a slowing job market and spending levels continue to create headwinds. Interest rates are higher than they have been in recent years, which impacts consumer spending. This uncertainty around the macroeconomic environment and spending levels creates uncertainty in demand, which is not good for our business. We think the near-term will continue to be a little bumpy, and we hope to see improvement in 2026.
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