Large logistics properties lead industrial sublease boom in US

Article originally posted on CoStar on October 7, 2025

While uncertainty over tariffs and the economy still influences logistics leasing, tenants signing new leases are more often trying to capitalize on an increasing amount of available sublease space.

That property is often available at a discount to new space leased directly. Large logistics occupiers with spaces exceeding 100,000 square feet are facing decreased competition due to a pullback in leasing activity in this market segment. In fact, new leases for industrial spaces measuring 50,000 to 100,000 square feet have declined 25% from recent highs, and new leases for larger spaces exceeding 100,000 square feet have decreased even more, by an average of 30%.

In addition, a significant increase in new supply over the past few years, specifically for logistics properties between 100,000 and 500,000 square feet, has produced an abundance of available warehouse space. Now, the amount of available sublease space is also increasing, driven largely by a readjustment in the space needs of major tenants

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Available sublease space first began to increase significantly beginning in 2023, with a substantial portion concentrated in large logistics properties constructed since 2010. This competitive sublease space can have asking rents at a discount of more than 20% compared to rental rates for direct space, making it increasingly attractive for prospective tenants.

As a result, the number of sublease deals signed over the past three years for logistics space has increased at a rate well above the historical norm. More than 8% of new lease deals for large properties involved sublease space, contrasting with the historical average of just 4.8% between 2015 and 2019.

While leases for smaller industrial properties have also seen an increase in sublease activity, it remains subdued relative to the number of sublease deals in larger buildings.

The increased sublease activity, coupled with tenants increasingly optimizing space use by signing smaller leases in facilities with higher ceiling heights, creates an additional drag on future demand and rent growth for larger logistics properties.

Furthermore, large logistics occupiers, those occupying spaces exceeding 100,000 square feet, have been signing shorter lease terms over the past year. This is yet another change relative to the immediate post-pandemic period, when average lease terms lengthened close to eight years for large properties.

The average lease term now stands closer to seven years, returning to the pre-pandemic time period from 2010 to 2019, in contrast with continually rising lease terms for spaces of between 10,000 and 100,000 square feet.

While these logistics leasing trends are not consistent across every U.S. market, they are becoming more common. About 75% of U.S. logistics markets are experiencing a backlog of available space, with nearly 50% of the markets experiencing weakening rent gains, specifically for larger properties.

Major logistics markets in California, such as Stockton, East Bay, Orange County and the Inland Empire, as well as Portland, Oregon, and Pennsylvania’s Lehigh Valley, which tend to have major exposure to international supply chains, have seen a significant increase in available logistics sublease space.

Across these regions, sublease space represents well over 17% of the total available logistics space, exceeding the U.S. average of 12%. Going forward, this elevated sublease availability is expected to keep a lid on future rent gains and give tenants the upper hand in lease negotiations with landlords in these areas.