Class A industrial real estate is holding its ground as investors look for stability in a choppy market. Modern facilities and entitled development sites are proving to be defensive plays, maintaining value even as vacancy normalizes and capital becomes more selective.
Class A remains the institutional safe haven
National vacancy for Class A industrial assets has climbed to 7.5%, reflecting a broader market normalization and a modest rise in overall vacancy. Modern, well-located Class A facilities continue to outperform older product and remain a core focus for institutional capital.
Executives from Affinius tell GlobeSt.com that these assets are being treated as critical infrastructure for omni-channel retail and returns processing. Functions that rely on modern building systems are difficult to replicate in legacy warehouses, which helps explain why land pricing has generally held firm across most markets despite the 2025 slowdown.
Lange Allen, head of North American Logistics for Affinius, told GlobeSt.com he would not describe institutional underwriting today as “aggressive.” “If anything, investors have become considerably more selective and disciplined over the past two years,” Allen said.
Rent growth assumptions have come down, exit cap rates are generally underwritten around 5%, and many buyers are building in some cap rate expansion over their hold periods. While going-in cap rates may appear low relative to historical averages, most investors are underwriting Class A assets to achieve stabilized yields of roughly 5.5% to 6.0% over the next two to three years, rather than relying on overly optimistic assumptions.
The development pipeline has contracted sharply, reducing future competitive supply at a time when tenant demand is concentrated in newer, highly functional logistics facilities. Following the dot-com recession and the Global Financial Crisis, industrial deliveries declined by 56% and 84%, respectively, and this cycle is projected to see a 72% decline from peak deliveries. In the five years after those prior downturns, properties less than 10 years old outperformed older assets by 188 to 216 basis points annually across all major building size categories.
It’s not fully accurate to view Class A industrial solely through the lens of omni-channel retail or returns processing, Allen said. Demand today is broad-based across retailers, manufacturers, third-party logistics providers, distributors, and other occupiers. Regardless of industry, tenants continue to place a premium on modern Class A facilities because they improve operating efficiency, support automation, and reduce long-term occupancy costs.
Modern design drives tenant stickiness
Allen told GlobeSt.com that today’s Class A facilities are fundamentally different from warehouses built 20 or 30 years ago. These buildings offer greater electrical capacity to support automation and robotics, more efficient HVAC systems, larger office and employee amenity areas, EV charging infrastructure and significantly improved energy efficiency through better wall, roof and dock door insulation.
Site design has evolved as well, with more trailer storage, improved truck queuing capacity, clearer separation of truck and automobile traffic, and pavement systems engineered for heavier truck volumes and higher utilization. Those features are increasingly non-negotiable for occupiers that are pushing throughput and adopting automation.
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As importantly, many tenants are making substantial investments in automation, racking systems and specialized equipment inside these buildings, according to Allen. Those investments are intended to last for many years, so tenants want buildings that minimize operational disruptions, can accommodate future technology upgrades, and provide the flexibility to evolve with their business, he said.
That combination of functionality, reliability, and operating efficiency is why modern Class A facilities continue to command a premium and remain the preferred choice for institutional investors and occupiers alike, Allen said. For investors, that stickiness of tenant investment and the operational advantages of Class A design are key reasons these assets are viewed as a relatively volatility-resistant segment of the industrial market.
Entitled land holds up as development slows
On the land side, pricing for entitled, development-ready industrial sites has held up better than many expected, even as higher interest rates and a tougher capital markets backdrop slowed new development in 2025, according to Affinius’ head of research, Mark Fitzgerald.
With the notable exception of Southern California, particularly the Inland Empire, values for most entitled, shovel-ready sites have remained relatively stable over the past three years. “The primary area where we’ve seen meaningful price adjustments has been larger, multi-phase land holdings with longer development timelines and significant infrastructure requirements, where values have generally declined 10% to 15%,” Fitzgerald told GlobeSt.com. He said those discounts largely reflect higher carrying costs and increased uncertainty around when those sites can realistically be brought into production.
One factor supporting land values is that well-located industrial sites remain scarce in many markets and now compete directly for capital with other land-intensive uses such as data centers and advanced manufacturing. That additional demand has helped offset some of the softness from the industrial development slowdown, particularly for sites with strong power availability and transportation access, Fitzgerald said.
While transaction activity slowed in 2025, land values themselves were more resilient than many investors anticipated. The RCA Development Site Price Index rose 5.0% in 2025 and is up another 7.2% year-to-date in 2026, while US farmland values increased 4.3% in 2025, according to the USDA. Within that aggregate performance, fully entitled, development-ready industrial sites in desirable logistics markets have generally maintained their value, while larger, multi-phase holdings with more complex timelines have come under greater pricing pressure, Fitzgerald said.
Fitzgerald believes land pricing has likely reached its trough and is more likely to appreciate over the next one to three years than decline. “Markets with limited entitled land, strong population and employment growth, and favorable logistics fundamentals are likely to see the strongest appreciation, while markets with abundant land supply or raised vacancy may recover more gradually,” he said.
Looking ahead, he expects industrial land values to be driven by the interaction among occupier demand, capital markets and the supply of developable land. “On the downside, a period of economic weakness or recession could further reduce leasing activity and tenant expansion plans, leading developers to delay new projects and lowering demand for development sites,” Fitzgerald said. “That would place the greatest downward pressure on land values in markets with raised vacancy, abundant developable land, or a large pipeline of future supply.”
