Q3 2025 marked a turning point from rapid expansion to disciplined optimization. The decline in the Logistics Managers’ Index (LMI) from 59.2 to 57.4 highlighted an industry slowdown as companies recalibrate amid tariff uncertainty and weaker consumer demand.
Inventory levels also reflect the shift from bulk replenishment via tariff-driven frontloading to shorter, more flexible cycles.
Equally important, warehousing prices eased slightly, though they remain elevated year-over-year, which continues to pressure margins and favor efficiency over expansion, according to ITS Logistics US Distribution and Fulfillment Index, powered by Cresa.
“The LMI closed Q3 with a composite reading of 57.4 in September, marking the lowest level since March, yet remaining well within expansion territory,” says Ryan Martin, president of distribution and fulfillment for ITS Logistics. “The data illustrates a logistics environment that continues to grow as supply chain companies remain active. These companies are managing uncertainty as decision-making becomes more cautious amid tariff changes, uneven consumer confidence, and elevated capital costs, which are shaping inventory and facility strategies across industries. As a result, there was a notable increase in warehouse capacity and utilization, mainly due to significant declines in transportation utilization and the increasing number of stored goods.”
Key takeaways:
· Warehousing utilization increased to its highest level in over a year, reaching 65.3 in September, while capacity remained balanced at 51.6, suggesting that supply and demand for storage space are finally nearing equilibrium. Despite this shift, profitability pressures persisted. Operating costs, although slightly easing, remain significantly higher than pre-2023 levels. It is for this reason that many operators have made the previously mentioned shift from expansion to an efficiency-focused approach.
· The drop in warehouse price ratings by more than six points to 66 marks the slowest rate of growth since spring. In addition, transportation capacity sector readings fell by 2.2 points to 55.1 between August and September, indicating that available freight capacity continued to expand at a slower pace, with carriers adjusting to softer shipping volumes as demand leveled off. Transportation utilization values also dipped by nearly five points month-to-month to a 55 reading, well short of September’s eight-year average of 65.1.
· Overall, Q3 2025 reflects an industry entering a phase of controlled momentum with resilient growth, where operators are recalibrating to prioritize sustainability rather than scale. It is a logistics landscape that rewards operational intelligence and disciplined execution heading into peak season and beyond. Strategic themes that shippers should recognize for Q4 2025 include:
- The national industry vacancy rate of Q3 2025 conceals a shortage of functional, move-in-ready space. Many newly completed speculative projects remain shell-only or lack automation infrastructure, dock packages, and power density required for modern fulfillment. Some warehouse providers are also augmenting existing space to create purpose-built fulfillment operations for industries with complex or niche operations.
- Companies are pivoting from volume-based inventory strategies to agility-based positioning, with some third-party logistics companies responding by offering modular storage terms and multi-client space utilization models, enabling customers to minimize stranded capital.
- After two years of sustained escalation, warehousing prices and PPIs are entering a controlled normalization phase. For shippers, the next two quarters represent a window to renegotiate renewal and overflow rates before inflationary cost floors reassert in 2026.
- Inland markets continued to post strong utilization in Q3, illustrating that, even as national vacancy stabilizes, occupiers continue to favor centrally located nodes with lower drayage costs and increased outbound coverage.
- The upcoming holiday season emphasizes repositioning and network optimization over massive import inflows, due to earlier inventory frontloading. As a result, transportation pricing is expected to remain constrained, even as warehouse labor demand tightens temporarily around December.
