Functional Warehouse Space Tightens as Vacancy Rates Hit Highest Since 2014, ITS Logistics Reports

The latest Q2 ITS Logistics US Distribution and Fulfillment Index, powered by Cresa, paints a complex picture of the current warehousing and logistics landscape. With vacancy rates climbing to 7.1%, the highest since 2014, and warehousing capacity contracting for the first time in over a year, the market is facing significant challenges. Despite stable overall capacity on paper, the supply of operationally ready warehouse space is tightening, impacting shippers, retailers, and logistics providers as they prepare for the latter half of 2025.

Inventory costs have surged to 80.9 on the Logistics Manager Index, the highest in over two years, driven by increased labor, storage, and insurance expenses. Meanwhile, the Producer Price Index for Warehousing and Storage fell by 5.1% from March, indicating softened pricing power for warehouse operators. These trends are occurring against a backdrop of rising consumer sentiment, which increased by 16% in June, suggesting cautious optimism amid stabilizing economic conditions.

Ryan Martin, President of Distribution and Fulfillment at ITS Logistics, emphasized the importance of securing viable space now to navigate the anticipated intensification of capacity and cost pressures. The index's findings are supported by 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's Q2 2025 U.S. Industrial Market Report.

The Logistics Manager Index, reflecting the perspectives of logistics professionals, averaged 59.4 in the second quarter, indicating continued expansion. However, warehousing capacity contracted for the first time since early 2023, while utilization remained strong. The demand for well-located, high-efficiency space continues to drive warehousing prices.

Following tariff-driven stockpiling surges earlier in the year, inventory levels are beginning to normalize, with larger shippers maintaining buffer stock and smaller firms adopting leaner models. This shift has led to decreased import volumes and reduced activity at fulfillment and retail nodes, as evidenced by downstream inventory readings.

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, fueling interest in automation. Core markets such as Dallas-Fort Worth, Chicago, and New York/New Jersey have shown steady rent growth despite elevated vacancy rates.

ITS Logistics provides a comprehensive suite of network transportation solutions and omnichannel distribution and fulfillment services, reaching 95% of the U.S. population within two days. The ITS Logistics US Distribution and Fulfillment Index offers valuable insights into the warehousing and storage sector, helping businesses optimize costs and navigate the evolving market landscape. For more detailed forecasts and analysis, visit https://www.itslogistics.com.