Industrial vacancy across the Puget Sound has climbed to its highest level in years as a wave of newly delivered logistics and warehouse facilities outpaces tenant demand, reshaping market fundamentals and signaling a shift from the ultra-tight conditions of the pandemic era.
Over the past several quarters, developers have delivered a significant volume of large-format logistics space—much of it built on a speculative basis without pre-leased tenants. While construction activity surged in anticipation of continued e-commerce growth and supply-chain restructuring, leasing activity has not kept pace, leading to a sharp rise in industrial vacancy rates.
Logistics and distribution properties have been disproportionately affected. Newer, high-clearance warehouse projects—often exceeding 200,000 square feet—now account for a sizable share of available space, particularly in submarkets that experienced the heaviest development pipelines. As these buildings come online simultaneously, vacancy has risen faster in logistics-oriented assets than in smaller, infill industrial properties.
The imbalance between supply and demand has been compounded by a slowdown in tenant expansion. Many occupiers that aggressively expanded their footprints during the peak of e-commerce growth are now rightsizing operations, delaying leasing decisions, or consolidating existing space. This has resulted in modest or negative net absorption even as new inventory continues to enter the market.
Despite the increase in vacancy, asking rents have not collapsed, supported by higher construction costs, limited developable land, and long-term confidence in the region’s role as a critical West Coast logistics hub. However, landlords are beginning to offer greater concessions, including tenant improvement allowances and more flexible lease terms, as competition for tenants intensifies.
Market observers note that the current conditions represent a normalization rather than a downturn. The Puget Sound industrial market remains fundamentally strong, supported by population growth, port activity, and proximity to major technology and manufacturing employers. Still, the near-term outlook suggests that vacancy levels will remain elevated until new construction slows and leasing demand absorbs the recent influx of speculative supply.
As developers become more cautious and tenants regain leverage in negotiations, the region is entering a new phase—one defined less by scarcity and more by selectivity, where location, building quality, and operational efficiency will determine which logistics assets outperform in a more competitive environment.
