Key Points:

• The Midwest industrial market is rebalancing following a significant wave of new industrial supply coming to market amid evolving demand conditions.
  
  
• Major Midwestern cities differ substantially in the size of their industrial stock and how it’s grown compared to pre-pandemic. Differences in vacancy and availability rates reveal where each city is positioned in the rebalancing cycle.
  
  
• Different types of industrial space—logistics, flex, and specialized—shape the tenant mix and market resilience across cities, further influencing the overall trajectory of the industrial real estate sector in the region.
  
  

Following a record-breaking wave of industrial space delivered over the past three years, the broader industrial commercial real estate (CRE) market is now  undergoing a rebalancing as this new supply meets softening demand. This X-Factor, the first in a three-part deep dive into the state of industrial real estate across the Midwest, will examine how each major Midwestern market is positioned to navigate this shift. 

"As the Midwest navigates the aftershocks of a historic industrial supply boom, the path to equilibrium varies widely across the region.”

Midwestern Industrial Market Size and Rebalancing Progress

Some Midwestern markets have substantially more industrial inventory than others. Unsurprisingly, Chicago is by far the largest market in the Midwest, with 1.4 billion square feet of existing industrial inventory. Detroit, the second largest market, has roughly 635 million square feet, less than half of Chicago’s total. Rounding out the top five are Minneapolis (435 million square feet), Indianapolis (430 million square feet), and Columbus, Ohio (380 million square feet). 

The chart below highlights the top 15 Midwestern markets by size of industrial stock, with the blue bars displaying current inventory in millions of square feet, corresponding to the left axis. The green and orange diamonds in the chart represent vacancy and availability rates, respectively, and correspond to the right axis. The difference between the two is subtle but important. Vacancy rates measure how much space is currently unoccupied, while availability rates are broader—they include vacant space as well as space listed for lease and sublease, even if it’s occupied. For example, a tenant planning to vacate a property at lease expiration would be counted in the availability rate, but not the vacancy rate. As a result, availability is a more forward-looking indicator, offering insight into future vacancy trends. When availability exceeds vacancy, it signals potential increases in vacancy as marketed space turns over. When the two rates are similar, it suggests that the market may be at or near peak vacancy.

Among the five largest Midwestern markets, Chicago, Detroit and Minneapolis have relatively low industrial vacancy rates ranging from 4.1 percent to 5.9 percent. In contrast, Indianapolis and Columbus, Ohio have much higher vacancy rates of 9.8 percent and 8.7 percent, respectively. However, the spread between availability and vacancy is wider in Chicago, Detroit, and Minneapolis (1.5 percent to 2.9 percentage points), suggesting these markets may not yet have reached peak vacancy and are still rebalancing. Conversely, Indianapolis and Columbus, Ohio, despite their higher vacancy rates, show minimal spread between availability and vacancy, suggesting that these two markets are near peak vacancy. In fact, among the top 15 Midwestern markets, Indianapolis and Columbus, Ohio have the smallest spreads, suggesting that they are nearer to the end of their post-supply wave rebalancing process. 

 
New Supply, Changing Vacancy Rates

Nationally, construction of industrial space peaked in the third quarter of 2022, and has been declining since, as newly built space is delivered to market and the number of new builds wanes. The chart below illustrates how vacancy rates in each Midwestern city have changed from the pre-pandemic period to the peak construction quarter, and to the present. By the third quarter of 2022, industrial vacancy rates had declined meaningfully in most Midwestern markets compared to the fourth quarter of 2019, as demand surged post-pandemic while supply had yet to catch up. 

Now, with much of that new supply delivered, vacancy rates have risen again, though to varying degrees. In Chicago, vacancy rates in the second quarter of 2025 are roughly back to pre-pandemic levels, near 6 percent. In Detroit and Minneapolis, vacancy rates are slightly higher than three years ago but remain below 5 percent. However, in Indianapolis and Columbus, Ohio, vacancy rates have increased considerably compared to pre-pandemic levels. That said, as shown in the first chart, despite these higher vacancy rates, Indianapolis and Columbus, Ohio have the lowest spread between availability and vacancy rates. This suggests they may be furthest along in the stabilization process—meaning vacancy rates in these markets are unlikely to rise much further, which may not be the case with other cities.

Not All Industrial Space is Created Equal

There are several types of industrial properties, each serving distinct purposes and attracting specific types of tenants. One of the most common is “logistics” space, such as warehouses and distribution facilities. “Flex” space is designed for mixed use – for example, a warehouse with attached office space that can be reconfigured to meet tenant needs. “Specialized” space serves unique functions, such as manufacturing, data centers, cold storage, or outdoor storage, and is often custom-built for a specific tenant. The chart below shows the proportion of each Midwestern city’s industrial stock categorized as logistics, flex, or specialized space. Among the top 15 Midwestern cities, Minneapolis has the highest share of flex space at 18 percent, Milwaukee has the largest share of specialized space at 46 percent, and Columbus has the largest share of logistics space at 80 percent. 

How Much Has Midwestern Industrial Stock Grown Compared to Pre-Pandemic?

The national wave of industrial supply has impacted some Midwestern markets more significantly than others. Among the top 15 cities with the largest industrial inventory, Indianapolis and Columbus, Ohio have had the most substantial growth in their industrial base compared to pre-pandemic—expanding by 24 percent and 21 percent, respectively. Chicago, which has the largest industrial stock in the Midwest, ranks fifth in terms of growth over that same period. Interestingly, Detroit—the second-largest Midwestern market by total inventory—has not grown much at all, with its industrial base expanding by just 4 percent over the past five years. This suggests that a larger share of Detroit’s industrial stock is older compared to the newer development seen in markets like Indianapolis and Columbus.

So, What’s the X-Factor?

As the Midwest navigates the aftershocks of a historic industrial supply boom, the path to equilibrium varies widely across the region. Larger markets, like Chicago and Detroit, appear further from stabilizing, while cities such as Indianapolis and Columbus, Ohio, despite elevated vacancy rates, appear to be nearing the end of their adjustment period.

Looking Ahead to Part Two and Three

Part one of this X-factor series explored the size and composition of industrial stock in major Midwestern cities, as well as how the recent supply wave has affected vacancy rates, and identified which markets are closer to rebalancing. In the next X-Factor, we’ll examine leasing trends in greater detail, including how the size of available industrial properties has shifted over the past five years and how vacancy rates differ between larger and smaller facilities. The third and final part of the series will focus on the purchase market, analyzing changes in transaction volume and pricing trends.