Positioning for Precision: How Industrial Lending Is Being Underwritten in 2025
by: Logan Bobis
Industrial real estate has long been the darling of commercial capital markets. Fueled by e-commerce, evolving supply chains, and logistics sprawl, it carried the past cycle with conviction. But as 2025 unfolds, the playbook has changed. Liquidity has not vanished, but its velocity and selectivity have. Lenders are still active, though the window has narrowed. The difference now is not just where capital is going but how capital is being underwritten and structured.
Liquidity Hasn’t Left, It’s Just More Selective
Industrial debt capital is still active, but it’s getting more selective. CBRE reports that industrial vacancy in the U.S. rose to 6.6% in Q2 2025, the highest since 2014, even as leasing activity increased year‑over‑year by 8.5% to about 424 million square feet. Lenders are no longer underwriting speculative warehouses far from demand without strong pre‑leasing or location advantages. Today, many of the deals that close are seeing LTCs more often in the 55–60% range, tighter debt yields, and stronger reserve or contingency requirements. Capital providers are digging deeper into sponsor track record, real lease-up metrics, and the ability to manage construction cost risk in markets where completions are down and vacancy is rising.
The Bar for Execution Is Higher, But So Are the Rewards
Industrial remains favored by institutional investors, but underwriting criteria have shifted. Lenders are prioritizing projects tied to rail, ports, and urban infill, with growing focus on labor availability and operational resilience. Markets like Phoenix, Dallas Fort Worth, and the Inland Empire are still in the spotlight, but even in those hubs underwriting is more cautious. Deals that cleared in 2021 now face debt proceeds cut by 10 to 15%, while rising construction costs, up 5.7% year over year according to Q2 2025 data from Turner Construction, are forcing sponsors to bridge larger equity gaps. For those with a tested track record and clear business plans, the market is still open. It is just a different kind of open.
Shifts in Supply Chain Strategy Are Creating Underrated Opportunity
The definition of efficiency in supply chains is expanding. Beyond next day delivery, users are weighing labor force proximity, fuel costs, multimodal connectivity, and even ESG impacts. This has turned attention toward Tier 2 markets such as Reno, Savannah, Louisville, and Salt Lake City. This can also be seen in overlooked assets, particularly those with repositioning potential. Former manufacturing sites, brownfield locations with embedded infrastructure, and urban adjacent flex assets are gaining favor. These are not trophy deals but complex, time sensitive opportunities requiring layered capital and underwriting nuance.
Navigating the New Market Landscape
What makes industrial debt in 2025 so nuanced is not just construction volatility or lender retrenchment, it is the mismatch between capital appetite and deal specificity. Many lenders want to place money, but only on exact terms. Sponsors often hold strong opportunities, but need structures that reflect reality, not just theory. This is where shaping projects to meet today’s stricter underwriting standards, aligning capital stacks with true absorption curves, and connecting sponsors to lenders who can price execution risk with confidence. At Lever Capital Partners, we work with sponsors to structure projects that meet today’s stricter underwriting standards, align capital stacks with true absorption curves, and connect them with the right lenders for execution.
The Path Forward: Discipline, Not Despair
The takeaway for sponsors in mid 2025 is clear. Industrial fundamentals remain strong, but success is no longer automatic. Execution matters, relationship equity matters, and precision matters. In a market defined by tighter standards and evolving supply chain demands, turning complexity into closed deals is what will separate the next cycle’s leaders from the rest. Position your deal for success, reach out to Lever Capital Partners today.
https://www.cbre.com/insights/books/us-real-estate-market-outlook-2025/industrial?utm_.com