Capital flows return to Industrial Real Estate as rate cuts loom

After a bruising 2023–2024 cycle of aggressive monetary tightening and frozen deal pipelines, signs are finally emerging that the tide is turning in favour of real estate investors—particularly those focused on resilient sectors like industrial real estate. Interest rates, which had climbed to multi-decade highs, are now widely expected to decline through 2025 as inflation stabilizes and the Federal Reserve pivots toward easing.

The fundraising environment for real estate has been under acute stress. In 2024, only $131 billion in private capital was raised globally for real estate investments, marking the lowest annual tally since 2012, according to PEI Group. But 2025 is telling a different story. Momentum is returning—albeit gradually—fuelled by large, sector-specific mandates and a strategic reallocation of capital away from challenged assets and into structural growth plays.

One of the most notable signals came from global alternative asset manager Carlyle, which recently closed its tenth U.S. real estate fund, raising more than $8 billion, even surpassing the level raised for its predecessor in 2021—despite what it called “one of the most difficult fundraising environments for real estate in recent memory.”

Carlyle’s strategy speaks volumes. According to Rob Stuckey, Carlyle’s head of U.S. real estate, the new fund will entirely exclude exposure to offices, hotels, and traditional retail, opting instead for residential, self-storage, and industrial sectors where structural demand remains intact and where rising replacement costs, limited new supply, and population shifts create pricing power.

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Among these, industrial real estate remains a standout. Vacancy rates for small- to mid-bay assets are holding firm under 5% in most U.S. metros. Leasing activity has rebounded sharply in Q2 2025, according to CBRE, driven largely by 3PLs, nearshoring demand, and inventory realignment across Tier 1 and Tier 2 cities.

Capital markets are taking notice. Transactions in industrial real estate are again gaining momentum after a slow 2024. Stabilized cap rates are holding between 5.5–6.5%, and investor interest is increasingly gravitating toward sub-$50 million assets—segments where value creation through lease resets, functional improvements, or infill redevelopment remains robust.

The anticipated decline in interest rates could be the final catalyst that reignites the sector. As borrowing costs fall, IRRs on industrial deals become increasingly compelling—especially in deals where current cash flow already covers debt service and allows for fixed-rate refinancing within 2–3 years. The positive leverage environment we saw in the mid-2010s may be re-entering the picture, particularly in markets like Atlanta, Dallas, and Chicago, where industrial demand is outpacing new deliveries.

After two years of capital rationing, a new cycle of real estate investing is quietly taking shape—and industrial is clearly among the favoured sectors. With fundraising rebounding and capital markets warming to the first signs of monetary easing, the second half of 2025 into 2026 may represent a unique entry point for investors seeking durable income and inflation-resistant growth.

Institutional players are already repositioning their capital accordingly. Individual investors and family offices looking to ride the next wave of wealth creation should take note.

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