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Warehouse Space to Tighten, ITS Logistics

[ August 1, 2025   //   ]

ITS Logistics, the asset-based North American third-party logistics provider, said its second quarter U.S. Distribution and Fulfillment Index, powered by Cresa, sees a tightening of warehouse space in the second half of the year.

Calling it “market recalibrating,” ITS Logistics said that tariff-driven front-loading continues to influence inventory strategy for shippers of all sizes.

Vacancy rates climbed to 7.1 percent, the highest since 2014, even as warehousing capacity contracted for the first time in more than a year. Inventory costs also surged to 80.9 on the Logistics Manager Index – the highest in over two years – driven by elevated labor, storage and insurance expenses. Meanwhile, the Producer Price Index (PPI) for Warehousing and Storage fell 5.1 percent from March, reflecting softened pricing power for warehouse operators. Consumer sentiment rose 16 percent in June, signaling cautious optimism amid stabilizing economic conditions, ITS Logistics said.

“Shippers and logistics providers who act now to secure operationally viable space will be best positioned as we move into 2026 and beyond,” said Ryan Martin, president of distribution and fulfillment at ITS Logistics. “The pressure on capacity and costs is expected to intensify with seasonal inventory builds and consumer demand later this year. The greatest challenge we see when it comes to the real estate market is that costs continue to remain high, while brands face too many unknown variables in the economy and consumer spending. This is going to impact overall building absorption rates this year and next.”

National net absorption held steady at 29.6 million square feet, while new completions dropped to a five-year low of 71.5 million square feet – down 45 percent year-over-year. Vacancy rose above 7 percent for the first time since 2014, and average asking rents increased 2.6 percent year-over-year, the slowest growth since early 2020.

The Logistics Manager Index, which surveys logistics professionals on leading economic indicators within the supply chain, averaged 59.4 in the second quarter, indicating a steady pace of continued expansion. Warehousing capacity fell to 47.8 in June, its first contraction since early 2023, while utilization remained strong at 62.2. Warehousing prices held at an elevated 68.3, driven by demand for well-located, high-efficiency space.

Following tariff-driven stockpiling surges in the first half of 2025 – first at the beginning of the year and again during the 90-day reprieve granted in April – inventory levels are beginning to normalize, with larger shippers continuing to hold buffer stock while small and mid-market firms switch to leaner inventory models. As a result, downstream inventory readings dropped, indicating a significant decrease in import volumes and reduced activity at fulfillment and retail nodes.

“If you look at things like flows through West Coast ports, blank sailings, container prices and idle empties on the West Coast, it’s clear the majority of goods that are going to be sent over are already here,” Zac Rodgers, lead author of the Logistics Managers’ Index, told ITS Logistics. “However, there will still be some movement required to get those goods from distributors, wholesalers, or logistics service providers down to retailers – the back half of peak season.”

The ITS Logistics US Distribution and Fulfillment Index is available at https://web.its4logistics.com/quarterly-warehouse-index.

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