Commercial | Fall 2025

The post-pandemic industrial boom has cooled, prompting a critical question: Is balance returning to the big-box market?

From 2020 to 2023, developers could not keep up with the demand for large industrial buildings. A boost in online shopping stimulated demand for distribution centers everywhere, not just in the traditional hubs. A slight recovery in brick-and-mortar shopping put online sales back on their pre 2020 trend of rapid growth. The development pipeline continued to deliver new inventory. Online retailers began rethinking their portfolios and some of the giants even gave back entire buildings, admitting that their forecasts were wrong. Rising vacancy and lackluster rent growth would have eventually slowed construction. Instead, new development came to a sudden halt because of the fastest interest rate rise in 50 years. This raised the long-term prospect of very tight conditions for occupiers once economic growth resumed. In the meantime, many market observers (and disappointed owners) witnessed poor leasing in the largest new industrial buildings for more than a year. Smaller properties were the star performers as firms sought sites “closer-in” to important locations, such as airports or manufacturing hubs.

Real estate markets are cyclical, and oversupply finds its solution, especially in Texas where long-term trends mean most bubbles are absorbed by steady household and employment growth. It’s expected that those lonely big-box buildings outside the beltways would soon attract more attention. In addition to steady growth, reshoring will help demand catch up to idle inventory. The question is, are we back to a balanced market for big industrial?

In statewide overall industrial trends, we can see few turning points yet. The current down cycle can be dated to mid-2022. Since then, net absorption and rent growth have continued to weaken. Vacancy has risen steadily to 8.5 percent. Deliveries have slowed, but were running double the net absorption rate in mid-2025. Still, most major markets had either rent or absorption growth above the national average (see figure). Dallas-Fort Worth, Houston, and San Antonio outperformed the U.S. in both categories. Only the Rio Grande Valley saw poorer performance in both metrics.

Source: Texas Real Estate Research Center analysis of CoStar data

Considering the major markets, we can detect a few bright spots. DFW saw its rate of inventory growth increase starting third quarter 2024. This change is not isolated. The Houston market began expanding its pipeline a quarter earlier, but total volume remains relatively low. On the other hand, Austin and San Antonio construction levels continued to fall slightly. Quarter-to-quarter net absorption in the big-four markets has fluctuated with some up and some down each period. Second quarter 2025 compared to the first quarter saw simultaneous improvement in net absorption in all four markets. That has happened only once since the end of steady absorption growth in fourth quarter 2021. Rent growth, at least in asking terms, has been stable in DFW, Houston, and San Antonio. Austin continued to see falling rates in the summer of 2025.

Note: Includes properties listing at least 10,000 square feet for lease, DFW metro area, July 9,2025.
Source: Texas Real Estate Research Center analysis of CoStar data

To isolate large industrial properties performance, we can consider the DFW metro area (see table). As the focal point of big-box investment, it lists half the properties larger than 500,000 square feet in Texas. The table reveals that the market-wide net absorption has not carried over to this sample. It has been negative for properties between 100,000 and 500,000 square feet. Vacancies remains high for these buildings, running around 50 percent or more. One bright spot is a slight positive net absorption number for the largest properties. It’s also interesting that all three size categories have substantial volumes under construction. The market wide developer optimism discussed above seems to also apply to the large property segment.

We may be seeing the first green shoots of a cycle turn. Only time will tell. Developer optimism, even in the face of political and economic uncertainty, rests on confidence in Texas outgrowing the nation. If development had continued to lag, then a return to strong economic growth would have put tremendous pressure on expanding tenants. Recent performance hints that in the next 18 to 24 months, occupiers may not face sudden shortages and higher rents. Real estate markets work, but their lagging response to price signals and long construction times means owners and tenants are seldom happy at the same time.

Daniel Oney, Ph.D. ([email protected]) is research director with the Texas Real Estate Research Center.