1.5 Billion Square Feet of Empty Warehouse: Why That Headline Is Misleading
National vacancy hit 7.5% — a decade high. But if you run a facility under 50,000 square feet, you're living in a completely different market. Here's what the numbers actually mean for your operation.
You've probably seen the headlines: record warehouse vacancy, 1.5 billion square feet sitting empty, landlords getting desperate. CoStar projects vacancy will hit 7.8% by year-end 2026.
If you operate a smaller 3PL, those headlines are basically irrelevant to your reality.
The market is split in two. Cushman & Wakefield's Q4 2025 data shows vacancy for spaces under 50,000 square feet at just 4.8%. Big-box warehouses over 300,000 square feet are running at nearly 10%. The pandemic building boom produced massive distribution centers for Amazon-scale operations. Almost nothing got built for the independent operator who needs 20,000 to 60,000 square feet.
The result: landlords with giant new facilities are offering three-plus months of free rent on long leases. Meanwhile, small-bay rents keep climbing — Cushman & Wakefield data shows spaces under 100,000 square feet average $9.51 per square foot versus $7.26 for larger facilities, a roughly 31% premium that reflects just how undersupplied the small-format market remains.
What this means in practice: If you're in a larger space and your lease is coming up, you have leverage you haven't had in years. Use it. Negotiate hard on rent, free months, and tenant improvement allowances.
If you're looking for smaller space, don't expect relief. Charlotte saw 79% of its leasing activity last year come from spaces under 100,000 square feet — while brand-new 400,000+ square foot buildings sat empty. That pattern holds in most major markets.
Regional quick hits: Southern California's Inland Empire has 61% more available space than 2022, but it's almost all big-box. The Southeast — Carolinas and Georgia — is still tightening as nearshoring drives demand. CBRE's outlook highlights Texas border markets and the I-35 corridor as getting busier as companies bring supply chains closer to Mexico.
The oversupply will correct. Construction starts have dropped 60%, deliveries are at their lowest since 2017, and Cushman & Wakefield projects vacancy peaks this year then declines in 2027. But the small-bay squeeze is structural, not cyclical. If you have good space, hold onto it.