KBRA Finds Healthy Outlook for Industrial Real Estate

The outlook for industrial real estate remains healthy despite near-term headwinds, according to a new report from KBRA, New York.

The sector will be supported by continued growth in e-commerce, supply chain modernization, manufacturing and infrastructure investment, KBRA said in Industrial Real Estate: Shifting Fundamentals and the Rise of Industrial Outdoor Storage.

The report noted that rapid post-pandemic rent growth left many industrial legacy leases 25% or more below market, which provided “substantial upside” as leases expired and reset to market. “However, as this gap has narrowed, the remaining potential for rent growth has moderated,” KBRA added.

“The sector’s favorable operating fundamentals continue to attract lender interest and increased commercial mortgage financing activity,” KBRA said. Year-to-date through July, industrial collateral represented 19.3% of total commercial mortgage-backed securities issuance, or $14.3 billion, compared with 14% ($9.1 billion) during the same period in 2025.

Industrial outdoor storage (IOS) rents averaged $13.14 per square foot in late 2025–approximately 18% above traditional industrial rents–while vacancy remained at just 2.5%, compared with 6.7% for traditional industrial properties.

“Institutional debt capital markets activity in IOS is increasing, including single-borrower CMBS and private credit transactions,” the report said.

KBRA said institutional investors now account for an estimated 35%-45% of IOS acquisitions, up from approximately 25%-30% four years ago. “While institutional interest has grown, underwriting scrutiny is increasing, particularly around zoning, entitlement risk and environmental considerations,” KBRA said.