As 2025 closes, data suggests that the greater metropolitan Washington, D.C., area is stable but, like most markets nationally, remains below the industrial peak values achieved post-pandemic when vacancy rates hovered below 5 percent. That is no surprise, as we may never experience another “perfect storm” scenario in our lifetimes.
The overall market for industrial buildings 100,000 square feet and larger is a healthy 6.3 percent, inclusive of data centers. A significant percentage of vacancy is masked by the build-out of data centers in Northern Virginia because, removing this asset class, the vacancy increases to approximately 9.1 percent. The number increases closer to 10 percent when we focus more specifically on logistics spaces, according to data from CoStar Group.
Confidence remains strong for leasing activity in larger Class A industrial buildings, but the underlying economic fundamentals, uncertainty in tariff policy and geopolitical instability could lead to a continued trend of higher vacancy rates in the future. Consumer spending underpins the economy and is increasingly dependent on wealthier households who account for the majority of spending.
Low- and middle-income households have continued to be squeezed by the rising costs of food, fuel and housing, which impacts the demand for shipped, manufactured and finished products.
Free rent coming back?
If vacancy rates continue to climb in 2026, then we anticipate a stronger tenant’s market as more spaces will be available, and landlords compete for occupiers to maintain occupancy levels. Asking rents will either flatline or decline, and landlords will need to offer more concessions such as free rent or more generous tenant improvement (TI) packages to attract or keep quality tenants. Free rent is serving as an incentive for businesses to renew.
Sublease space
Subleased space for buildings 100,000 square feet and larger now represents 10 percent of the total available square footage, suggesting that several companies that struck larger leases post-pandemic are moderating footprints. Companies are extending their decision timelines and, in several cases, have favored short-term renewals to figure out how policy changes will affect trading and supply chains.
Logistics is surging
Despite increasing vacancy rates and uncertain economic conditions in the second half of 2025, there has been a resurgence of leasing activity. Absorption ending in third-quarter 2025 was 2.1 million square feet of space, compared to the three-year average of 1.5 million square feet.
In addition, warehouses and distribution centers posted year-over-year rent growth of 5.6 percent in the local area as of the third quarter, as compared to just 1.5 percent nationally. Asking rents in the region reached $16.11 per square foot, which is significantly higher than the national average of $11.27. This pricing is a direct result of increased demand and fewer available spaces, especially as ground-up construction decelerates, in addition to the robust competition for strategically placed distribution space.
Analyzing segments of D.C.
There are currently 80 buildings 100,000 square feet of space or larger available for lease in the D.C. metro area, including 28 existing buildings, nine under construction and 42 proposed. Prince George’s County has shown strong activity with leasing at the National Capitol Business Park / Turnbridge Equity project, although the new Class A development pipeline has dropped.
Landover, Md.: Thirty-nine industrial buildings exceeding 100,000 square feet with a negative absorption rate of approximately 521,000 square feet versus fourth-quarter 2024 and a vacancy rate of 13.2 percent. However, a new 10-year, 129,000-square-foot lease was signed at 6304 Sheriff Road by Weee!, America’s largest online Asian supermarket.
Hyattsville, Md.: Five industrial buildings over 100,000 square feet and a vacancy rate of 25 percent driven by the 180,000-square-foot vacancy at 2300 Craftsman Circle.
Beltsville, Md.: Fourteen industrial buildings over 100,000 square feet with a negative net absorption rate of 12,300 square feet versus fourth-quarter 2024. Vacancy in Beltsville has consistently been in the 4 percent range.
Frederick, Md.: Forty industrial buildings over 100,000 square feet with a negative net absorption of approximately 50,000 square feet versus fourth-quarter 2024 and a vacancy at 7.5 percent. A new 10-year, 140,000-square-foot lease was recently signed at 4451 Georgia Pacific Blvd. by Power Solutions.
Washington, D.C.: Thirteen industrial buildings over 100,000 square feet with a positive net absorption of 25,000 square feet versus fourth-quarter 2024, with vacancies at around 5 percent.
Manassas, Va.: Seventy industrial buildings over 100,000 square feet with a positive net absorption of 655,000 square feet of absorption with a vacancy rate at 1.7 percent.
Major takeaways include: (1.) There has been a resurgence of leasing activity at the end of 2025 by larger, well-capitalized companies in Class A industrial space, which suggests a landlord’s market for this product. (2.) The market has experienced reduced demand from small to mid-sized companies that will typically go to Class B and C buildings for the lower rents.
We anticipate seeing vacancies rise in older industrial buildings, leading to a tenant’s market and a widening spread from Class A rents and valuations.
— By Bryan Herr and Oliver Fryer, vice presidents of brokerage at MacKenzie Commercial Real Estate Services. This article was originally published in the November 2025 issue of Southeast Real Estate Business.