Tag Archives: IndustrialRealEstate

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

https://www.bisnow.com/los-angeles/news/mixed-use/sunset-boulevard-8850-sunset-silver-creek-development-foreclosure-129476

https://www.bisnow.com/los-angeles/news/construction-development/opportunity-zones-los-angeles-projects-129374

https://www.bisnow.com/los-angeles/news/hotel/los-angeles-hotels-tourism-megaevents-international-tourists-leisure-travel-129185

Will the Construction Slowdown Continue to Drive Up Asking Rents for Industrial Properties?

by: Tiara D’Mello

Limited Supply and Past Trends

A recent decline in construction starts could result in increased asking rents for industrial properties in 2025. Throughout 2024, industrial construction starts experienced a 33.5% decline, mirroring broader trends. In 2023, new starts fell by 40%, reflecting tightened loan conditions, rising costs, and economic uncertainty (Lung). Nationally, in-place rents increased by 7.5%, indicating supply constraints are already influencing prices. These trends highlight how reduced construction activity has consistently driven up rents by limiting the availability of new industrial spaces (CommercialEdge).

Rising rents in the industrial property sector offer exciting opportunities for both existing and new owners. However, securing capital for these projects can be challenging as we enter 2025. Lever Capital Partners, experts in the industrial real estate market, are here to help. We specialize in crafting tailored strategies to secure the most competitive financing solutions, whether you’re developing new projects, acquiring properties, or optimizing your investment portfolio for sustained success.

Future Trends and Demand-Supply Gap

Looking ahead, demand for industrial spaces remains robust due to e-commerce growth, nearshoring, and shifting supply chain strategies. However, the slowdown in new projects will likely continue to widen the gap between demand and available supply. Industrial facilities, particularly in key logistics hubs like Los Angeles and the Inland Empire, continue to report rising rents as vacancy rates tighten. For example, rents in the Inland Empire increased by 12.5% in 2024, demonstrating the price pressures created by sustained demand coupled with limited new construction (CommercialEdge).

This persistent demand is driven by several factors. The e-commerce sector’s expansion has increased the need for strategically located warehouses and distribution centers. Similarly, nearshoring—the practice of relocating production facilities closer to domestic markets—has spurred demand for industrial properties in North America. Additionally, evolving supply chain strategies emphasize the importance of proximity to major markets and transportation networks, further increasing demand for logistics hubs. These factors, combined with limited new construction, are expected to exacerbate the demand-supply gap, keeping pressure on asking rents.

Regional Variations

The impact of the construction slowdown varies by region, with high-demand areas like Southern California, Dallas-Fort Worth, and Chicago feeling the effects more acutely. Southern California, particularly Los Angeles and the Inland Empire, has consistently seen some of the highest rent increases due to its critical role in global trade and logistics. In these regions, vacancy rates have fallen below 2%, leaving tenants with few options and driving up competition for available spaces. Meanwhile, markets like Dallas-Fort Worth and Chicago, which serve as major inland logistics hubs, are also experiencing rising rents and tightening vacancies. However, regions with more available land or slower demand growth may not experience the same level of price increases, highlighting the localized nature of these trends.

Rising Costs and Inflation’s Impact

While construction slowdowns create supply challenges, rising costs and inflation also impact landlords. Higher expenses for maintenance and financing push property owners to increase rents to maintain profitability. Yet, it’s important to connect these costs directly to construction trends. Developers are pausing projects partly because high interest rates and economic uncertainty have made financing less viable. These factors intertwine, with slower construction reducing new supply and compounding the effects of inflation on rent increases (Coldwell Banker).

In addition, inflation has driven up the costs of raw materials and labor, making new developments more expensive. This has led many developers to delay or cancel projects, further straining the supply pipeline. For existing property owners, these rising costs create additional pressures to increase rents, as they seek to offset higher operational and financing expenses. The interplay between construction slowdowns and inflation highlights the broader economic dynamics at play in the industrial real estate market.

Strategic Implications for Tenants and Investors

The current trends in industrial real estate have significant implications for both tenants and investors. For tenants, rising rents and limited availability mean they must act strategically when securing space. Long-term leases and early renewals can help mitigate exposure to escalating costs. For investors, the supply constraints and rising rents present opportunities for strong returns, particularly in high-demand markets. However, navigating the challenges of financing and rising construction costs requires careful planning and market analysis.