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Q3 Marks Inflection Point for Logistics Real Estate Market
IBI Index cooled to 53 in Q3, with recovery led by large and e-commerce players amid ongoing trade volatility.
Jordan B.
November 10, 2025
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Good morning. After a slow start to the year, warehouse demand is picking up speed. Q3 brought stronger leasing, rising utilization, and early signs that logistics real estate is turning the corner.
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Market Snapshot
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Logistics Lift
Q3 Marks Inflection Point for Logistics Real Estate Market
After months of uncertainty, the logistics property market is showing early signs of recovery, and strategic demand is making a quiet comeback.
Turning point: Prologis’ Q3 2025 IBI report signals a clear shift: net absorption hit 47 MSF—a 64% jump QoQ—as lease signings and build-to-suit activity returned to healthier levels. While still below long-term norms, the market is moving off the bottom, with high proposal volumes pointing to continued momentum into 2026.
Cautious inventory tactics: Utilization averaged 84% in Q3 and approached 85% in October as customers leaned into “just enough” inventory strategies. This leaves room for upside if demand picks up. Manufacturers and wholesalers led after front-loading freight, while retailers lagged—but that could shift ahead of the holidays.
Confidence creeps back: Major occupiers—particularly in e-commerce, food & beverage, and healthcare—are resuming long-term leases and refocusing on network optimization. Leasing rose 10% in Q2 and Q3 vs. early 2025, signaling a shift in sentiment. Discretionary sectors remain on hold, awaiting more economic clarity.
Vacancy holds steady: Vacancy remains around the mid-7% range—balanced but not overbuilt. Spec development is well below pre-pandemic norms due to tighter margins, zoning hurdles, and limited land. With replacement-cost rents 20% above market, new projects are tough to pencil—especially in high-cost areas.
Space gets specific: With space tightening in key markets and size ranges, built-to-suit projects are on the rise, reflecting a shift back to long-term planning and growing scarcity. Tenants are locking in leases ahead of rising costs, as Q3 rent declines eased to around -1% and signs point to a market trough.
➥ THE TAKEAWAY
Preparing for 2026: Logistics real estate demand has shifted from pause to planning. With fewer spec projects and rising tenant confidence, scarcity is emerging, setting the stage for a tighter leasing market in 2026.
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Lending rebound: Commercial and multifamily mortgage originations surged 36% YoY in Q3, marking the fifth straight quarter of growth.
Extension game: A looming $180B wall of maturing CRE debt hasn't triggered the expected distress cycle, as lenders broadly opt to extend loans rather than force refinancing or sales.
Distress drift: CRE distress rose to 11.4% in October, nearing a cycle high as matured loans struggle, with office, hotel, and multifamily sectors under pressure.
Cut clash: The Fed faces a sharply divided vote at its December meeting, as softening jobs data and lingering inflation complicate the case for a final 2025 rate cut.
On the hunt: Cerberus Capital Management is raising $3B for a new opportunistic real estate fund targeting data centers, multifamily, and distressed credit.
Stalled momentum: The U.S. services sector expanded in October, but ongoing job market weakness and economic uncertainty are dampening business confidence and clouding outlooks.
Houston heat: Houston’s 55,000 acres of vacant buildings and paved lots are worsening urban heat, prompting city leaders and developers to push for greener infrastructure, tree planting, and heat-reducing design.
Hot spot: Springfield, MA, held its spot as the hottest U.S. housing market in October, as strong demand and limited supply drove rapid sales.
Fuel vs. fortune: A $2B condo project on Fisher Island is clashing with Miami-Dade officials over the planned removal of a key fuel depot vital to PortMiami.
🏘️ MULTIFAMILY
Autumn slump: Multifamily rents in the U.S. saw their sharpest October decline in over 15 years, as elevated supply continues to outpace demand.
Tempered optimism: Multifamily developer confidence rose slightly in Q3, with gains in low-rise and subsidized segments, but overall sentiment remains negative.
Senior setback: Blackstone is unloading a $1.8B senior housing portfolio at a loss after operational challenges, pandemic fallout, and rising costs derailed its investment strategy.
Stable shift: Multifamily demand remains strong as new construction hits decade lows, pushing vacancies down and signaling a shift toward stable, supply-constrained growth.
Reston record: BXP is reportedly selling its Signature apartment towers at Reston Town Center for around $240M, a record-breaking multifamily deal for the area.
Refi of the day: Arden Living secured a $161M refinance loan from Starwood Property Trust for its 222-unit Forty Six Fifty multifamily project in Manhattan’s Inwood.
Market split: U.S. multifamily investment rose 7.5% to $108B through Q3 2025, but CBRE data reveals sharp local divergences.
🏭 Industrial
Industrial focus: Peakstone Realty Trust is selling off its office portfolio, aiming to shed $300M–$350M in assets, to fully transform into a pure-play industrial REIT.
Data doubts: Deutsche Bank is reportedly exploring hedging strategies to manage its growing exposure to AI-fueled data center debt.
Storage slowdown: Self-storage REITs are facing softening fundamentals in 2025, with NOI growth stagnating and returns lagging.
NoVa surge: Vantage Data Centers has broken ground on a $2B, 192MW data center campus in Stafford County, VA., marking its fourth and largest expansion in the state.
Houston infill: Hanover and Pearlmark have broken ground on Ella 45, a $17.3M, 254,000 SF light industrial project in North Houston.
🏬 RETAIL
Consumer strain: Major fast-food chains like McDonald’s, Wendy’s, and CAVA are seeing weaker traffic from younger and lower-income diners.
Waco revamp: Waco is planning a $1.4B, 12-year downtown overhaul with new parks, civic buildings, a convention center, hotel, town center, and ballpark.
Store closures: Saks Off 5th will close 10 U.S. stores, including locations in NYC, Chicago, and Austin, as part of a strategy to focus on higher-performing locations.
Leasing surge: Retail REIT Macerich saw an 81% YoY jump in Q3 leasing activity, totaling 1.5M SF, with 2025 YTD leases up 86%.
🏢 OFFICE
Boom time: Hudson Pacific plans strategic office sales amid a West Coast leasing rebound, as AI demand and rising valuations signal the market has turned a corner.
PENN power: Robinhood signed October’s largest Manhattan office lease at PENN 2, highlighting strong tenant demand following the tower’s major redevelopment.
Madison meltdown: Vornado is set to lose 650 Madison Avenue after defaulting on its mortgage, as lenders prepare to seize and sell the once-prized Plaza District tower.
Biotech bust: Arena BioWorks, a $500M-backed Cambridge biotech hub, abruptly shut down due to policy uncertainty and weak funding.
HQ dispute: Maryland is suing the Trump administration for canceling the FBI’s planned move to Greenbelt, claiming the reversal is unlawful and harms promised local economic gains.
🏨 HOSPITALITY
Middle squeeze: Hotel operators are struggling with flat RevPAR, weak government and international travel, and mounting debt maturities, pressuring midtier brands hardest.
Casino buyout: Vici Properties is acquiring seven Nevada casinos from Golden Entertainment for $1.2B in a sale-leaseback deal.
AEG revival: AEG is making its third attempt to develop a Downtown L.A. lot across from L.A. Live, filing plans for a 49-story mixed-use tower with 365 residential units, a 334-key hotel, and entertainment space.
Shutdown strain: Pebblebrook remains optimistic for 2026, but short-term hotel performance is hindered by the government shutdown and weak travel demand.
A MESSAGE FROM ARBOR REALTY TRUST
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📈 CHART OF THE DAY
Cap rates are expected to compress globally across various scenarios, supporting a medium-term CRE rebound as central banks ease and interest rate cycles shift.
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