US REITs and Lodging: 2Q26 Industrial Insights and Market Fundamentals

Research evidence excerpt

US REITs and Lodging: 2Q26 Industrial Insights and Market Fundamentals

US REITs and Lodging

13 July 2026 Citi Research

2Q26 Industrial Insights and Market

Fundamentals

Additional Highlights

– National vacancy was flat q/q at 7.5% and vacancy for the top 25 markets was

flat q/q at 7.4% for the third consecutive quarter; this is indicative of the

improving fundamental landscape. Among the top 25 markets, the four

largest increases in vacancy were in Atlanta (~70bps), Seattle (~60bps),

Minneapolis (~30bps), and Kansas City (~30bps). Conversely, the four

markets with the largest declines in vacancy were Phoenix (~90bps),

Indianapolis (~80bps), Memphis (~40bps), and Cincinnati (~30bps).

– Among the top 25 markets in the US by square footage, there is 2.0% of stock

(~297msf) under construction (up +45msf sequentially), of which we estimate

~55% is pre-leased. The drag from new supply has largely eased following

peak COVID levels due to the rising cost of capital, increased construction

costs and improving net absorption. According to FW Dodge data, the

national under construction pipeline of ~2.4% of stock (vs. ~2% on CoStar’s

figures) is trending above the historic average (since 2000) of ~1.5% of stock

under construction and the under construction pipeline has fallen 27% from

the prior 12-mo peak (3-mo MA) (US REITs and Lodging - Brick by Brick – An

In-Depth Look into May Construction Starts). A higher percentage of BTS

starts and declining deliveries could support improved net absorption into

2026.

Notably, six markets – the BWI Corridor (~47msf), Dallas (~45msf), Houston

(~28msf), Atlanta (~21msf), Phoenix (~21msf), and Chicago (~20msf) – account

for ~62% of the under-construction pipeline in the top 25 markets and are

56% pre-leased.