SOUTHEAST U.S. INDUSTRIAL MARKET REPORT – Q1 2026

Q1 2026 marked the cyclical pivot the U.S. industrial sector has been waiting for since 2022. Industry-wide tracking converged on a consistent reading: vacancy peaked, completions decelerated to multi-year lows, occupier demand held durable, and asking rents posted their first positive year-over-year prints since 2024. National vacancy registered between 6.7% and 7.5% across the major tracked universes, with the consensus reading at 7.0%, ten basis points below the late-2025 peak. Net absorption ranged from 40 million to 50.9 million square feet across the major datasets (the strongest first quarter in three years and a 52% year-over-year increase), against 145.2 million to 249.8 million square feet of total leasing activity, up 14% to 17.8% year-over-year. New leases represented 71.6% of the activity, indicating that the rebound reflects fresh demand rather than rollovers.

Supply-side discipline reinforces the durability of the rebalancing. Q1 2026 deliveries fell 27% year-over-year to 54 million square feet, the lowest quarterly total since mid-2017, with 73% of completed product representing speculative inventory now working through lease-up. Total space under construction reached 284.1 million square feet at quarter-end, up 6.2% annually, but remained well below the 2022 peak and reflected disciplined re-engagement in markets with the strongest fundamentals rather than a return to broad speculative development. Asking rent growth registered between 0.8% and 2.1% year-over-year across the major tracking universes, with 60% of 83 major U.S. industrial markets reporting positive annual rent growth and 19 markets exceeding 5%. Big-box leasing activity (spaces 500,000 square feet and above) surged 80.7% year-over-year, signaling that the long-term commitments held back through 2024 and 2025 are returning.

The Southeast outperformed the national rebalancing on three measurable axes. The first is absorption concentration: inland U.S. markets captured over 90% of Q1 net absorption, with Atlanta and Charlotte ranking among the top five U.S. markets by occupancy gain. The second is rent durability: long-cycle rent growth above 80% over the past five years was led by Philadelphia, Baltimore, Nashville, and Fort Lauderdale, with two of the four anchored in the Southeast. The third is investor preference: institutional 2026 investor surveys ranked Atlanta second, Charlotte fifth, and both Nashville and Tampa in the top ten among target U.S. metros, the strongest regional showing of any geography. Industry capital tracking confirmed the Southeast outpaced all U.S. regions in 2025 transaction dollar volume growth at 26%.

Within the Southeast, three storylines defined the quarter. Atlanta's bulk recovery drove between 4.5 million and 5.2 million square feet of net absorption in Q1, the strongest first quarter in four years and the highest total since Q4 2022, with direct vacancy falling 40 basis points to 7.6% and the I-85 North submarket alone delivering 3.4 million square feet of net absorption. Carolinas manufacturing scale was reflected in Charlotte's small-bay segment vacancy of 5.8% with 4.6% year-over-year rent growth to $10.63 per square foot, while Charlotte ranked among the four U.S. markets driving Q1 2026 national construction pipeline expansion, and Nashville held industrial vacancy in the low-to-mid 4% range with rents averaging approximately $11.70 per square foot NNN. Port Southeast bifurcation was visible in Savannah's 1.7 million square feet of Q1 absorption against 4.8 million TEUs through October 2025 (up 4% year-over-year per the Georgia Ports Authority), and Charleston's emergence among the Sun Belt's strongest Q1 2026 performers with over 3 million square feet of net absorption against direct-and-sublease vacancy that ended Q4 2025 at 14.3%, the first quarterly decline in three years.

Capital markets remained selective but increasingly functional. Stabilized industrial debt cleared at competitive spreads against the 10-year Treasury's stable 4.26% to 4.34% trading band. Industry capital tracking projected total commercial mortgage originations of $805 billion in 2026, a 27% increase over 2025, with CRE investment activity projected to rise 16% to approximately $562 billion, nearly matching pre-pandemic averages. National CMBS loan maturities of $525 billion in 2026 are followed by $587 billion in 2027 against an estimated $1.5 trillion of cumulative two-year CRE refinancing activity. Industrial accounted for the leanest concentration of distress within that maturity wall: $3.7 billion of 2026 industrial CMBS maturities sit on watchlists against 96.8% sector occupancy, materially below the office and multifamily distress profiles.

The Southeast's Q1 2026 outperformance against the national rebalancing rests on three structural fundamentals that distinguish the region from coastal-gateway and Midwest peers. The first is port-anchored coastal demand at Savannah, Charleston, Brunswick, Mobile, Jacksonville, Tampa, and Miami. The second is inland logistics scale across Atlanta, Charlotte, Nashville, Memphis, Greenville-Spartanburg, and the Carolinas Triangle and Triad corridors. The third is the multi-year reshoring capital cycle that has positioned the Carolinas, Coastal Georgia, the Tennessee Valley, and the Alabama-Mississippi auto belt as the country's leading domestic manufacturing buildout. The Southeast spans six core industrial state markets (Georgia, Florida, North Carolina, South Carolina, Tennessee, and Alabama) supported by a continuous logistics corridor stretching from the Gulf Coast through the I-95, I-85, I-75, I-65, I-26, and I-40 spines.

Demographic and capital-flow indicators reinforce the structural setup. The U.S. Census Bureau reported that the South remained the fastest-growing region between July 2024 and July 2025, though the growth rate moderated to 0.9% from 1.4% in the prior period. Institutional 2026 investor surveys ranked Atlanta second, Charlotte fifth, and both Nashville and Tampa in the top ten among target U.S. metros, the strongest regional showing of any geography. Industry capital tracking confirmed the Southeast outpaced all U.S. regions in 2025 transaction dollar volume growth at 26%, with Charlotte and Jacksonville ranking among the markets where investor demand best aligned with available inventory. Macro outlooks for 2026 projected U.S. GDP growth of 2.0% with inflation averaging 2.5%, a backdrop that supports continued occupier expansion without suggesting broad-based valuation surges.

Port infrastructure continues to drive coastal demand. The Port of Savannah moved 4.8 million TEUs in calendar year 2025 through October, up 183,250 TEUs or 4% year-over-year per the Georgia Ports Authority. October 2025 monthly volumes totaled 452,934 TEUs, an 8.4% decline from October 2024 reflecting tariff-related trade compression. The Georgia Ports Authority is on schedule for the Spring 2026 opening of the $127 million Blue Ridge Connector inland rail terminal, located 50 miles north of Atlanta near Gainesville, which provides direct rail service for the Northeast Georgia industrial corridor and removes truck congestion from the I-85 corridor. Phase 2 of the $1.54 billion Ocean Terminal renovation completes in June 2026, taking Ocean Terminal capacity to 2 million TEUs annually. The Port of Charleston posted absorption gains in Q1 2026 even as the broader Charleston industrial market continued to digest a multi-year supply wave; Charleston-area industrial vacancy ended Q4 2025 at 14.3%, the first quarterly decline in three years, after peaking on the back of approximately 30 million square feet of deliveries since 2022. The Port of Brunswick handled 689,662 units of autos and heavy equipment through October 2025, down 9% year-over-year, reflecting softer automotive trade volumes that have weighed on Coastal Georgia sale-leaseback activity.

The Southeast continues to absorb a disproportionate share of U.S. manufacturing reshoring capital, though Q1 2026 reflects a more nuanced reading than the 2022 to 2024 announcement cycle. EV demand softening following the September 30, 2025 expiration of the federal $7,500 tax credit drove a 43% drop in U.S. EV sales in Q4 2025, and major OEMs took $25 billion-plus of cumulative impairment charges (Ford $19.5 billion, GM $6 billion, plus AESC's pause of the second Florence, South Carolina cell facility). The strategic response across the Southeast has been pragmatic rather than directional: Hyundai re-engineered the Metaplant for an approximately 30% EV and 70% hybrid plus internal-combustion mix, BMW pivoted to internal battery assembly with cells potentially sourced from China despite tariff exposure of up to 82%, Toyota officially started battery production at its $13.9 billion Liberty, North Carolina plant on November 12, 2025 (the company's first battery plant outside Japan), and Nissan retrenched on EV plans at its Canton, Mississippi assembly plant in early May 2026. The forward read is that the announced manufacturing capital is largely committed, the production base is being built, but the demand mix has shifted from pure EV to hybrid-anchored production.

The Hyundai Metaplant in Ellabell, Georgia represents $12.6 billion of total Georgia investment including the Metaplant and adjacent battery joint ventures, targeting 500,000 annual units across hybrid and EV models, with two adjacent battery joint-venture plants targeting first-half 2026 production: one with LG Energy Solution adjacent to the Metaplant and one with SK On in Bartow County. Hyundai's announced employment build-out at the Metaplant complex is 8,500 direct jobs by 2031 plus an estimated 6,900 supplier roles, with approximately 1,440 workers hired as of January 2026. The cumulative effect across the Southeast is an industrial demand base that is increasingly weighted toward domestic production rather than pure import distribution, which materially changes the financeability profile of port-proximate and inland industrial assets across the cycle.

Population in-migration continues to drive small-bay and infill demand independent of port and reshoring activity. Atlanta added approximately 330,000 residents since 2020, taking metro population to roughly 6.4 million. Tampa added population at 170 daily arrivals through 2025, Orlando at approximately 400 daily arrivals. The Florida commercial sales tax repeal effective October 1, 2025 removed a structural occupancy cost that had affected small industrial tenants and retailers across the state, providing a modest tailwind to Florida industrial leasing economics in Q1 2026.

Atlanta — Southeast Distribution Anchor

Atlanta delivered the Southeast's strongest Q1 2026 absorption performance and one of the strongest quarterly results in the country. Industry tracking placed net absorption between 4.1 million and 5.2 million square feet across the major datasets, with leasing activity reaching 9.5 million square feet, up 3.2% year-over-year. The strongest tracked total represented the highest quarterly absorption since Q4 2022 and more than five times the Q1 2025 print. Direct vacancy declined to between 7.5% and 7.6% across the major direct-tracking universes, falling 40 basis points quarter-over-quarter and registering the second consecutive quarter of improvement; broader gross vacancy readings including sublet space registered up to 8.7%. Bulk distribution vacancy held stable at 7.0% for buildings over 500,000 square feet.

The I-85 North submarket led with 3.4 million square feet of net absorption, its largest quarterly total since Q2 2021, and 16.3 million square feet of cumulative leasing across the trailing five-quarter run. I-20 West posted 600,396 square feet, its fourth consecutive positive quarter, while Airport/South Atlanta shifted to positive territory with 800,103 square feet after persistent 2025 drag. Airport/South Atlanta vacancy still climbed 250 basis points year-over-year to 10.6% on the lingering effect of large-block move-outs, including DHL's exit from a 1 million square foot footprint. Average NNN asking rents tracked between $8.81 and $10.00 per square foot across the major datasets, reflecting both the deceleration from peak ($9.45 in Q1 2025) and modest 2.3% year-over-year growth at the metro tracking level. Q1 deliveries of 2.2 million square feet ran well below the 2021 to 2025 quarterly average of 6.1 million, and between 14.3 million and 17.0 million square feet remained under construction across the major datasets, slightly behind year-ago levels and well below the 27.9 million square foot 2021 to 2025 average.

UCB's announced $2 billion biologics facility at Rowen in Gwinnett County (supporting 330 jobs) and continued credit-tenant absorption support a constructive forward read. Manufacturing payroll contracted 1.7% year-over-year in January and trade and transportation employment was off 1.3% year-over-year, reflecting the gradual rationalization of EV-supplier headcount in the metro and Sixth District. SK Battery America announced a 958-job reduction at its Commerce, Georgia facility on March 6, 2026 (a 37% workforce cut at the $2.6 billion site, with approximately 1,600 employees retained), reinforcing the cyclical drag on Atlanta-area battery and EV-supplier employment that the Federal Reserve's January and March 2026 Beige Books characterized as flat-to-slightly-down across the Sixth District.

Nashville — Inland Distribution Tightness

Nashville maintained one of the country's tightest major industrial markets in Q1 2026, with vacancy in the low-to-mid 4% range under the most current direct-vacancy tracking and broader availability registering near 8.9% on the speculative supply that has worked through Wilson, Rutherford, and Southeast Nashville submarkets. Industry tracking placed Nashville vacancy at 4.5% in Q4 2025, the third consecutive quarter of decline, with the market improving further in early 2026. The Nashville industrial sector reached a record annual transaction total of $1.2 billion in 2025, the strongest investment year on record, anchored by institutional portfolio sales. Long-cycle Nashville rent growth above 80% over the past five years places the market in a top-four U.S. cohort alongside Philadelphia, Baltimore, and Fort Lauderdale.

Industrial rents in Nashville averaged approximately $11.70 per square foot NNN, with smaller buildings under 100,000 square feet commanding rents around $14.00 per square foot and flex product reaching $18.93 per square foot. Annual asking rent growth registered 5.6% in early 2025 and is expected to reaccelerate as construction slows. Approximately 8 million square feet remained under construction in mid-2025, weighted toward the Wilson and Rutherford County submarkets that have absorbed more than 80% of industrial deliveries since 2020. Recent leasing has been led by RB Distribution (312,000 square feet), Geodis Logistics (270,400 square feet), and Goggin Warehousing (267,596 square feet). Volkswagen's Chattanooga assembly plant continues as the Tennessee manufacturing anchor, and 2026 outlooks consistently flagged Nashville and Louisville among the inland markets best positioned for 2026 rent acceleration given limited reliance on international trade exposure.

Charlotte — Multi-Modal Industrial Hub

Charlotte's industrial market continued to recover from the supply wave that pushed metro vacancy to a ten-year high in Q1 2025. Direct vacancy ended 2025 at 8.1%, down 50 basis points from the cyclical peak, with continued absorption gains offsetting vacant deliveries. Broader gross vacancy readings including sublet space registered higher, reflecting the lingering effect of big-box deliveries that have not yet fully leased up. Industry tracking placed Charlotte among the four U.S. markets driving national construction pipeline expansion in Q1 2026, alongside Memphis, St. Louis, Columbus, and Minneapolis. Asking rent growth registered 4.9% year-over-year to $8.03 per square foot, with leasing concentrated in the State Line and southeast submarkets. Charlotte's sub-125,000 square foot small-bay segment continued to show relative tightness: small-bay vacancy registered 5.8%, asking rents of $10.63 per square foot (up 4.6% year-over-year from $10.16), and only 2.1 million square feet under construction in the small-bay format. Charlotte recorded 9.5 million square feet of 2025 industrial leasing activity, supported by Daimler and Citigroup expansions plus active consolidation among Amazon and Walmart, which absorbed large-format blocks even amid elevated vacancy in the bulk distribution segment.

Carolinas Advanced Manufacturing — Greenville-Spartanburg, Triad, Triangle

The Greenville-Spartanburg corridor remained the Southeast's leading advanced manufacturing market in Q1 2026, anchored by BMW's Spartanburg County campus, where the automaker employs roughly 11,000 people across an approximately 10 million square foot footprint with more than $13.3 billion of cumulative invested capital (through year-end 2023). BMW's pivot to internal battery assembly beginning in 2026 (with cells potentially sourced from China despite tariff exposure of up to 82%) kept the regional supplier ecosystem active even after AESC paused the Florence, South Carolina cell facility. Toyota's $13.9 billion Liberty, North Carolina battery plant officially started production on November 12, 2025, supporting up to 5,100 jobs and 30 GWh annual capacity at full ramp, while Scout Motors' Blythewood, South Carolina assembly plant is actively hiring as of February 2026, anchoring the broader I-26/I-85 manufacturing flow.

North Carolina's Research Triangle continued to capture life sciences expansion, with cumulative regional investment reaching $10.8 billion and Triangle industrial vacancy holding below 6%. Northern Virginia closed 2025 at 3.7% vacancy, anchored by data center construction tied to AI infrastructure demand and proximity to Loudoun County's Internet exchange concentration. Nashville's transferable manufacturing supply-chain demand and Charlotte's general industrial scale framed the inland Carolinas as the most resilient subregion of the Southeast in Q1 2026.

Savannah and Charleston — Port-Driven Markets

Savannah delivered 1.7 million square feet of Q1 2026 absorption, joining Houston (4.9 million) and New Jersey (3.4 million) as the U.S. port-proximate markets posting the strongest quarterly demand. Container volume at the Port of Savannah reached 4.8 million TEUs in calendar year 2025 through October, up 4% year-over-year per the Georgia Ports Authority, with the port serving 37 weekly services, the most in the U.S. South Atlantic. The Georgia Ports Authority's $4.5 billion ten-year capital plan, the $127 million Blue Ridge Connector inland rail terminal opening Spring 2026, and the Phase 2 Ocean Terminal renovation completing in June 2026 with 2,650 feet of total berth and 2 million TEU annual capacity together support a forward Savannah port capacity of 7.5 million TEUs by 2030.

Charleston's industrial market continued to digest the speculative wave that pushed direct-and-sublease vacancy to 11.6% in early 2024 and to 15.3% by Q2 2025. Q4 2025 Charleston vacancy ended at 14.3%, down 30 basis points quarter-over-quarter and 80 basis points year-over-year, the first quarterly decline in three years. Q1 2026 absorption strengthened materially, with Charleston joining Atlanta, Dallas-Fort Worth, and Houston as Southeast and Sun Belt markets each exceeding 3 million square feet of net absorption for the quarter. Recovery analyses projected a return to a 5% vacancy by 2031 under 2 million square feet of annual absorption or by 2029 under 3 million. Camp Hall in Berkeley County earned recognition as the country's top industrial park, anchored by Volvo Cars Charleston and Redwood Materials. South Carolina export totals were partially supported by Boeing 787 Dreamliner shipments out of North Charleston, even as the Port of Charleston posted softer outbound cargo through Q1 2026.

Florida Markets — Population-Driven Two-Track Story

Florida industrial markets split into two distinct tracks in Q1 2026. Miami remained the South Florida anchor with vacancy rising 80 basis points to 7.2% on new deliveries, asking rents at $17.26 per square foot NNN (easing 1.7% quarter-over-quarter but holding near all-time highs), and asset pricing reaching a new high of $257 per square foot. The Miami construction pipeline of 4.06 million square feet represented a 15% decline from Q1 2025 and was expected to support stabilization through 2026.

Tampa industrial fundamentals registered 7.3% vacancy at year-end 2025, the highest reading in a decade, with 588,605 square feet of Q4 2025 absorption and broader Tampa-area Q4 totals reaching 852,295 square feet under the most expansive tracking universe. Asking rents averaged in the $9.50 to $12.69 per square foot range across the major datasets, with annual rent growth moderating to approximately 3.3% to 3.4%, a notable deceleration from prior peaks but still above the national average. Tampa's small-bay segment held vacancy near 3.2% with rent growth of 6.5%, the strongest pace among major Florida industrial markets. Orlando set up for accelerating performance after Q3 2025 absorption of 2.0 million square feet pulled vacancy down 40 basis points to 7.4%. Industry 2026 outlooks flagged Orlando among the top ten U.S. markets for industrial rent growth, with projections in the 7% to 9% range. Jacksonville's small-bay vacancy held stable with positive 1% to 2% rent trajectory anchored by JAXPORT logistics and rail intermodal demand.

Memphis — North-South Logistics Bridge

Memphis maintained its position as the Southeast's primary north-south logistics intersection, with FedEx Memphis-area employment stable at approximately 30,000 against the Network 2.0 corporate restructuring. FedEx's $200 million Memphis International Airport superhub modernization is scheduled for late 2026 completion, shifting demand toward maintenance technicians, automation specialists, and control-systems operators. Industry tracking projected that 40% of new 2026 Memphis industrial leases will require automation-ready specifications, up from 28% in 2023. Memphis ranked among the four U.S. markets driving Q1 2026 construction pipeline expansion alongside Charlotte, with 284.1 million square feet under construction nationally and Memphis among the leaders. Memphis benefits from a unique combination of intermodal infrastructure: the FedEx superhub, five Class I rail carriers, the BNSF and CSX intermodal yards, the Mississippi River barge network, and the I-40, I-55, and I-22 highway corridors. The structural labor shortage is increasingly shaping site selection in adjacent Northern Mississippi (Olive Branch, DeSoto County) and West Tennessee submarkets where modern bulk distribution product pairs with a less constrained labor pool.

Alabama — Southern Manufacturing Anchor

Alabama industrial activity in Q1 2026 was anchored by the Hyundai Motor Manufacturing Alabama plant in Montgomery, the Mercedes-Benz Tuscaloosa County plant, the Honda Lincoln plant, the Mazda Toyota Manufacturing facility in Huntsville, and Airbus operations in Mobile. The Birmingham, Huntsville, and Mobile metros each posted disciplined supply pipelines through Q1 2026, with Mobile capturing port-driven warehouse demand from the Alabama State Port Authority's container terminal expansion and Huntsville benefiting from continued aerospace, defense, and biotech expansion tied to the Cummings Research Park ecosystem. Alabama industrial fundamentals remained tight relative to the Southeast averages, particularly in modern Class A bulk and small-bay segments along the I-65, I-20, and I-10 corridors.

Capital markets entered 2026 in the most constructive position since 2022. The Federal Reserve held its target federal funds range at 3.50% to 3.75% across its January 28, March 18, and April 29, 2026 FOMC meetings following three 25-basis-point cuts in late 2025, with the April 29 vote split 8-4 (the first four-dissent meeting since October 1992). Governor Stephen Miran dissented in favor of a 25-basis-point rate cut, while three other members objected to the language in the FOMC statement that retained an easing bias. The 10-year Treasury closed April 24, 2026 at 4.31% and traded inside a tight 4.26% to 4.34% band over the prior two weeks, providing the most stable underwriting backdrop in three years. Total commercial mortgage originations are projected to rise 27% to $805 billion in 2026, with commercial real estate investment activity projected to rise 16% to approximately $562 billion, nearly matching pre-pandemic averages. Federal Reserve Chair Jerome Powell signaled at the April 29 press conference that he intends to remain on the Federal Reserve Board of Governors for an indefinite period after his term as Chair expires, with Kevin Warsh nominated as Powell's successor and Senate confirmation set for May 15, 2026.

Industrial remained the most financeable major property type in Q1 2026 across every major capital source. CMBS industrial allocation accounted for nearly 15% of 2025 originations. Industry data placed 2026 industrial CMBS maturities at $3.7 billion, the leanest concentration among major property types, against sector occupancy of 96.8% and minimal distress. National CMBS loan maturities of $525 billion are projected for 2026 followed by $587 billion in 2027, with industrial CMBS issuance expected to remain robust given e-commerce and reshoring tailwinds and the catch-up of market rents. Stabilized industrial debt cleared at competitive spreads in Q1 2026. Single-tenant net lease industrial transactions reached $8.8 billion in Q4 2025, up 1% year-over-year and accounting for 55% of total net-lease investment volume (the largest sector share, though down from 61% a year earlier as office gained ground). Total net-lease investment activity rose 13% year-over-year and 16% for full-year 2025 to $51.4 billion. Industrial cap rates entered a stabilization phase in 2026 with the potential for 5 to 15 basis points of compression on the highest-quality assets. Industrial sale-leaseback activity rebounded in late 2025 as Treasury yields stabilized, with the 4% range on the 10-year supporting more competitive cap rate pricing for corporate sellers.

Across the Southeast specifically, traditional bank lenders are open to new industrial credit but are prioritizing several criteria:

• Experienced sponsorship with strong global cash flow, verifiable operating history through the 2024–2025 absorption cycle, and demonstrated ability to maintain margin discipline.
• Assets in markets with diversified demand drivers (logistics, manufacturing, port-proximate, and last-mile) and manageable new-supply pipelines relative to existing inventory.
• Conservative leverage levels (typically 60%–70% on conventional executions) and DSCR cushions of 1.25x–1.40x stress-tested under elevated debt-service scenarios.
• Diversified tenant profiles that reduce reliance on any single occupier or supply-chain segment.

Sponsors unable to meet conventional bank criteria, particularly first-time owner-operators, those acquiring industrial assets with near-term repositioning requirements, and those with complex partnership-buyout or recapitalization structures, are increasingly turning to alternative debt structures:

• SBA 7(a) and 504 executions for owner-users acquiring or expanding manufacturing, distribution, and flex facilities. Owner-user demand has been a meaningful driver of recent sub-125K leasing activity in Charlotte and contributed to the Atlanta Q1 absorption rebound.
• Bridge and transitional loans for repositioning, lease-up, recapitalization, and acquisition of transitional assets, particularly in Charleston, Airport/South Atlanta, and oversupplied Florida submarkets where pricing dislocation creates opportunity for experienced operators with credible business plans.
• CMBS and LifeCo permanent financing for stabilized industrial assets with diversified credit tenancy, predictable rollover, and strong location characteristics. Long-term, fixed-rate executions are now competitive, and the return of 10-year terms is increasingly viable as conduit spreads tighten.
• Sale-leaseback structures for operating businesses seeking to unlock equity from owned real estate ahead of growth, M&A, or refinancing events. Industrial sale-leaseback cap rates compressed selectively through Q1 2026 as institutional and cross-border capital re-engaged with the sector.
• Structured capital and preferred equity for capital-intensive build-to-suit, EV supplier, cold storage, and pharmaceutical manufacturing programs where conventional senior debt requires gap financing or where sponsors are pursuing accretive recapitalization of in-place leverage.

Industry capital tracking confirmed that the Southeast outpaced all U.S. regions in 2025 transaction dollar volume growth at 26%, with Charlotte and Jacksonville ranking among the markets where investor demand best aligned with available inventory. Sponsors with clear business plans, defensible underwritten rents and concession assumptions, transparent capex strategies, and disciplined leverage continued to obtain the most competitive pricing across the Southeast in Q1 2026.

Navigating the Lingering Supply Wave

Approximately 30 million square feet of post-2022 deliveries remain in some stage of lease-up across the Southeast, concentrated in Charleston, the Atlanta Airport/South submarket, the Florida bulk-distribution segment, and certain Carolinas large-block corridors. Owners holding these assets face the longest path to stabilization (typically 12 to 36 months absent forced execution) and the highest risk of rent compression on competitive lease comps. Properties with credit tenancy, modern functional specifications, and infill locations in the Atlanta I-85 North, Charlotte sub-125K, Nashville mid-bay, Tampa small-bay, and Savannah port-proximate segments command durable pricing power and represent the most defensible holdings.

Positioning for Reshoring and Manufacturing Demand

Southeast industrial owners with assets adjacent to active manufacturing megaprojects (the Hyundai Metaplant in Coastal Georgia, BMW Spartanburg, the operational Toyota Liberty battery plant in North Carolina, the Volvo and Redwood Materials presence at Camp Hall, the Volkswagen Chattanooga complex, and the Scout Motors Blythewood facility) are positioned to capture supplier-tier demand through 2027 and beyond. Properties with high-bay clear heights, heavy power capacity, rail access, and trailer parking align best with these requirements. Owners willing to invest in clear-height extensions, ESFR sprinkler upgrades, dock-door additions, and power capacity expansion can reposition aging assets for premium leasing outcomes against build-to-suit pricing.

Managing Insurance, Tax, and Operating Cost Pressures

Florida property insurance costs increased 40% to 60% from 2020 levels, an expense that flows through to NNN tenants as CAM and effectively raises total occupancy cost. Property tax revaluations in Atlanta, Nashville, Tampa, and Charlotte continue to lag asset value resets, creating refinancing surprises for owners in markets where 2024 and 2025 tax assessments did not adjust for cap rate movement. Energy efficiency upgrades, vendor consolidation, and selective tax appeals help preserve NOI. Florida's commercial sales tax repeal effective October 1, 2025 removed a structural cost overlay, modestly improving Florida industrial occupancy economics in Q1 2026.

Repositioning Older Industrial Assets

Buildings constructed before 2000 accounted for more than 100 million square feet of negative absorption nationally in 2024, while properties completed after 2022 captured more than 200 million square feet of positive absorption. The flight to quality continued in Q1 2026, with newly built buildings registering an 480 basis point year-over-year vacancy decline while older product saw vacancy rise 70 basis points to 5.6%. Strategic capital programs targeting truck courts, clear height, lighting, ESFR systems, trailer parking, automation-readiness, and selective office build-out can reposition older Southeast industrial assets for competitive leasing. Lenders are providing structured capital for these repositioning programs where sponsors demonstrate execution discipline.

Where Experienced Sponsors Create Advantage

Lender, broker, and equity-partner emphasis on sponsorship quality has continued to intensify through Q1 2026. Capital providers are differentiating sharply between sponsors who can demonstrate revenue-management discipline, expense control, capital-planning sophistication, and successful execution through the 2024–2025 absorption cycle, versus sponsors with less demonstrated experience in disciplined Southeast industrial operations. Sponsors who present detailed operational-improvement plans, realistic underwriting (including conservative rent-growth assumptions and stress-tested DSCR cushions), and clear exit strategies are obtaining materially more competitive terms across SBA, bridge, CMBS, and LifeCo executions.

The Q2 2026 outlook for Southeast industrial is anchored on three convergent indicators: durable occupier demand confirmed by big-box leasing and the 2025 absorption rebound, supply discipline confirmed by the 27% year-over-year decline in Q1 deliveries and restrained construction starts, and capital markets stability confirmed by the Federal Reserve's measured easing posture and the 10-year Treasury's narrow trading band. The forward read calls for continued vacancy compression in the strongest submarkets, accelerating rent recovery in markets where supply has already pivoted, and selective cap rate compression on institutional-quality assets through the balance of 2026.

Demand-Side Indicators

Big-box leasing of spaces 500,000 square feet and larger surged 80.7% year-over-year in Q1 2026, signaling renewed long-term commitments from 3PL operators, retailers, and consolidating distribution networks. Q1 2026 commercial real estate brokerage earnings reflected the broader recovery, with U.S. industrial leasing revenue rising sharply, driven by industrial, office, and data center demand. The Federal Reserve's April 2026 Beige Book reported that commercial construction and real estate demand increased moderately in recent weeks with industrial leasing rising. National vacancy is expected to begin trending downward through the balance of 2026 as existing supply continues to be absorbed and new construction starts remain restrained.

Supply-Side Indicators

New U.S. industrial completions fell 27% year-over-year to 54 million square feet in Q1 2026, the lowest quarterly total since mid-2017, with 73% of deliveries representing speculative product. The U.S. construction pipeline reached 284.1 million square feet at the end of Q1 2026, up 6.2% year-over-year (the highest level since Q3 2024) but still well below 2022 peaks. Within the Southeast, Atlanta's pipeline of 14.3 to 17.0 million square feet is well below the 2021 to 2025 quarterly average of 27.9 million, Nashville's pipeline runs near 8 million square feet weighted toward Wilson and Rutherford County submarkets, and Charlotte's expansion alongside Memphis is concentrated in build-to-suit and credit-tenant programs rather than speculative bulk distribution.

Capital Markets Indicators

The 10-year Treasury's stable trading band of 4.26% to 4.34% in late April 2026 supported reliable term-sheet pricing across the major capital sources. The Federal Reserve held rates at 3.50% to 3.75% across the January 28, March 18, and April 29, 2026 FOMC meetings. The April 29 vote was split 8-4, the first four-dissent meeting since October 1992. The Fed's median projection through 2026 calls for one additional 25-basis-point rate cut before year-end. Spread compression on stabilized industrial CMBS, life company, and bank executions through Q1 2026 created refinancing capacity for the wave of 2026 maturities. Industrial cap rate stabilization in 2026 carries the potential for selective compression on the strongest assets, while CRE sales volume is projected to rise 15% to 20% as institutional and cross-border capital reenters the market.

Trade Policy and Risks to the Outlook

Tariff and trade policy volatility remains a meaningful risk to the Southeast industrial outlook, particularly for port-proximate markets in Savannah, Charleston, Brunswick, Miami, Tampa, and Jacksonville. The Supreme Court's February 20, 2026 ruling in Learning Resources, Inc. v. Trump (a 6-3 decision authored by Chief Justice Roberts) struck down as unconstitutional the reciprocal tariffs imposed under the International Emergency Economic Powers Act, with the federal government having collected an estimated $166 billion in IEEPA tariffs from approximately 330,000 businesses (refunds pending). The Trump administration replaced the IEEPA framework within hours of the ruling with a 10% global tariff under Section 122 of the Trade Act of 1974 (raised to 15% by February 21, 2026 announcement, the maximum permissible rate under Section 122). The October 2025 Port of Savannah monthly volume contraction of 8.4% year-over-year and the Port of Brunswick's 9% year-to-date decline through October illustrate the sensitivity of coastal Southeast industrial demand to international trade dynamics. EV demand softening (reflected in the Q4 2025 43% drop in U.S. EV sales following the September 30, 2025 expiration of the federal $7,500 tax credit) has prompted GM ($6 billion charge), Ford ($19.5 billion charge), and BMW (AESC pause) to restructure battery investments, introducing uncertainty for the Carolinas and Coastal Georgia EV supplier ecosystem. Persistent CMBS distress, particularly carryover from extended 2023 and 2024 maturities, may compress refinancing capacity for transitional industrial assets.

Capital Strategy Implications

The Q1 2026 cyclical inflection defines the capital strategy window for Southeast industrial sponsors. Three distinct execution profiles emerge from the supply absorption curve. Stabilized assets in the markets that have already pivoted (Atlanta I-85 North, Charlotte sub-125K, Nashville mid-bay, Tampa small-bay, Savannah port-proximate, Northern Virginia data center adjacency) are positioned for selective cap rate compression and represent the most defensible refinancing and acquisition candidates ahead of the next leg of vacancy compression. Transitional assets in submarkets still digesting the 2022 to 2024 supply wave (Charleston, Atlanta Airport/South, oversupplied Florida bulk-distribution, certain Carolinas large-block corridors) continue to require structured capital (bridge, mezzanine, preferred equity, sale-leaseback, or recapitalization) paired with disciplined business plans, defensible rent and concession assumptions, and seasoned sponsors. Build-to-suit and owner-user programs aligned with the active reshoring corridor remain the most strategically attractive forward executions, particularly with SBA 504 supporting long-term operational economics for owner-occupied manufacturing and distribution facilities. The macro backdrop reinforces the timing case. The 10-year Treasury's stable trading band, the Federal Reserve's measured easing posture, projected $805 billion in 2026 commercial mortgage originations, and a projected 16% increase in CRE investment activity to $562 billion together frame a financing environment that is more constructive than at any point since 2022.