Industrial capital markets continue to evolve, shaped by disciplined investment strategies, shifting interest rate expectations, and selective capital deployment. While economic uncertainty remains, investor confidence has strengthened, particularly in core, well-located assets. Liquidity is expanding beyond short weighted average lease terms (WALT), mark-to-market deals, and moving into long WALT assets and even select development projects. To provide a deeper understanding of the market landscape, Colliers’ industrial capital markets experts share their perspectives on investment sentiment, asset preferences, and capital trends across key U.S. regions.

Q. What is the prevailing sentiment as we look ahead through 2025?

Gian Bruno (West) – Cautious optimism has been the theme of the first quarter. Investors are demonstrating a heightened level of discipline, leaning in on assets that fit their precise strategies while avoiding anything outside their investment strike zone. The focus has returned to tenant credit, market rent growth assumptions, and widening exit cap rate spreads, a reflection of broader macroeconomic unease filtering into underwriting.

Alex Cantu (Midwest) – The mood is a mix of anxious bias toward action and uncertainty about the right moves to make. Liquidity remains strong across both debt and equity markets, with some strategies arguably over-equitized. While investors are optimistic about economic growth and the possibility of a soft landing, concerns linger over the sustainability of industrial user demand amid shifting policies. Despite these concerns, sentiment is improved compared to a year or two ago as the economy continues to push forward.

Jimmy Ullrich (Southeast) – Disciplined optimism defines investor sentiment. The post-election landscape spurred an initial surge of investment activity, driven by expectations of greater economic clarity under the current administration. While recent policy shifts – particularly tariffs – have introduced new considerations, demand remains robust for high-quality industrial assets in supply-constrained markets. Investors are actively pursuing opportunities and remain highly engaged, with a growing appetite for assets priced to reflect today’s evolving market dynamics.

Q. Have market participants settled into a “higher-for-longer” interest rate environment? Is that changing their investment strategy?

Gian Bruno (West) – Most investors have accepted that the attractive debt pricing that was available post-COVID is a thing of the past, not likely to get back to those levels any time soon. However, the response varies by investor profile – many are redirecting capital toward value-add opportunities, with asset location playing a crucial role in decision-making.  This is in contrast to the frothy market environment we witnessed coming out of the pandemic, which saw cap rate spreads for secondary and tertiary submarkets narrowing substantially compared to tier 1 locations. 

Alex Cantu (Midwest) – We anticipate more selling activity over the next 12 months compared to the past two years. Rental rate increases are helping offset higher cap rates, enabling pro forma deals to pencil out. However, interest rate volatility remains a challenge, making some buyers hesitant despite long-term rates falling. Buyers are adopting a “wait-and-see” approach regarding pricing adjustments.

Jimmy Ullrich (Southeast) – By mid-2024, sellers of long WALT assets had largely embraced the realities of a higher-for-longer rate environment, leading to renewed momentum and improved liquidity in this segment. With core and core-plus capital flowing back into the market, we’ve seen a notable uptick in transaction activity for long WALT assets that had been sidelined since early 2022. Investor expectations have adjusted, resulting in a more active and confident marketplace for stabilized assets.

Q. There has been an appetite for “mark-to-market” deals in recent quarters, where are investors looking today for opportunities?

Gian Bruno (West) – There is still a healthy appetite for mark-to-market value-add assets throughout the West. However, the story surrounding submarket fundamentals is paramount, making it difficult to paint the region with a broad brush. If a given submarket has any perceived headwinds related to capital liquidity on the exit and/or leasing demand drivers upon tenant rollover, capital has shifted focused to assets with 4 years of WALT or longer.  More than a few investors have started to raise capital around a low basis, low yield, long-WALT strategy.

Alex Cantu (Midwest) – In the Midwest, Class A and B assets below 500,000 square feet with pre-2021 contractual lease rates and sub-5-year WALT are the most actively traded. Development challenges across various cities have reinforced this investment thesis. Additionally, core and core-plus capital is re-emerging, targeting low-volatility, long-term credit-backed assets.

Jimmy Ulrich (Southeast) – Short WALT, mark-to-market deals have dominated transactions since interest rates spiked in early 2022. Now, however, investors are increasingly gravitating toward long WALT assets with strong credit, recognizing them as a strategic hedge against economic uncertainty. Notably, we’re seeing family offices actively pursue these long WALT opportunities with mark-to-market upside, even when it involves sustained negative leverage – underscoring their long-term confidence in the sector.

Q.  Development has pulled back—when do you see general partner and limited partner capital ready to capitalize the next round of ground-up projects?

Gian Bruno (West) – The slowdown in leasing fundamentals has put many speculative projects on hold. Investors want to see existing supply absorbed before committing to new developments. That said, some markets are already showing early signs of absorption, a trend we expect to continue throughout 2025.

Alex Cantu (Midwest) – Development capital varies by market. Some Midwest cities will see new projects in 2025 backed by third-party capital, but a return to normalized delivery volumes is unlikely until late 2026 or early 2027.

Jimmy Ullrich (Southeast) – While development has slowed, market conditions are steadily improving. As the under construction pipeline shrinks and occupancy levels stabilize, we’re seeing capital reemerge for new projects, particularly in high-growth markets. By late 2024, select two-phase developments and forwards secured funding; both categories that were largely frozen since early 2022.  That momentum has carried into 2025. This trend is expected to accelerate, especially for build-to-suit opportunities.

A More Selective, Yet Competitive Market

The industrial capital markets entering 2025 are defined by a more selective but resilient investment landscape. While liquidity has expanded, the investment aperture has narrowed, and investors are more discerning than ever. However, for the right assets in prime locations, competition remains fierce and pricing strong.

Investors are playing the long game, prioritizing resilience, quality, and adaptability as they navigate economic and geopolitical changes. Those with a disciplined approach and a focus on core fundamentals will be best positioned for success in this changing market.