CoStar Group forecasts a turning point for U.S. industrial real estate, with net absorption overtaking new supply by late 2027 as construction slows and rent growth firms.

The research firm expects demand for warehouse and logistics space to outpace deliveries as the development pipeline thins. CoStar projects that construction activity will decelerate over the next 18 months, tightening the supply-demand balance that has weighed on industrial rents in recent quarters.

The forecast follows a period of elevated industrial deliveries that pushed vacancy rates higher in some markets. CoStar's outlook suggests landlords may regain pricing power as new projects become scarcer and tenant demand absorbs existing inventory.

Industrial property owners have faced rent-growth headwinds as developers rushed to complete projects financed during the pandemic boom. The sector saw record construction starts in 2021 and 2022, driven by surging e-commerce demand and supply-chain reconfiguration.

CoStar's projection of firming rent growth points to a market stabilization as those deliveries taper. The firm anticipates that absorption will strengthen as supply constraints ease competitive pressure on landlords.

The late-2027 inflection point would mark a shift from the current environment, where high vacancy and aggressive landlord concessions have characterized many industrial submarkets. CoStar bases its forecast on construction permits, project timelines and historical absorption patterns.

Industrial property investors have been adjusting underwriting assumptions to reflect the elevated supply. The CoStar forecast suggests a window for repositioning assets before the market rebalances and rental growth accelerates.

The firm's analysis tracks construction permits and development pipelines across major industrial markets. CoStar expects the supply overhang to clear as projects complete and fewer new developments break ground, setting the stage for a demand-led recovery in 2027 and beyond.