Warehouse Real Estate Rebalances Amid Economic Shifts

The warehouse real estate sector is undergoing a significant transformation as supply and demand begin to stabilize following a pandemic-driven surge. E-commerce remains a key player, yet there is a noticeable shift as consumers return to brick-and-mortar shopping. This change has prompted warehouse tenants to prioritize efficiency, power availability, and strategic location over sheer square footage. New construction has slowed, and federal policies encouraging onshoring of manufacturing are helping the sector navigate high interest rates and economic uncertainty.

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According to Judy Guarino, managing director of commercial mortgage lending at JPMorgan Chase, "Industrial property rents are showing signs of stabilization, indicating a more balanced market environment." The big-box subsector, which constitutes about 25% of the total industrial warehouse space in the U.S., is particularly affected. Vacancies are nearing cyclical peaks, and new construction is contracting. Research from Colliers indicates that while new supply outpaced demand in the first half of 2025, the gap is narrowing, with third-party logistics firms like Ryder and DHL leading the charge in demand.

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In the first half of 2025, new supply totaled 48 million square feet, a stark contrast to the 330 million square feet completed at the peak of the cycle in 2023. The overall big-box vacancy rate rose to 11%, but demand in the third quarter significantly exceeded that of the first half, suggesting a positive trend towards market balance.

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Looking ahead, Prologis forecasts that e-commerce companies will account for nearly 25% of new leasing in 2026, as online sales are expected to rise globally. The demand for power-ready logistics facilities is becoming a critical factor in location selection, reflecting a broader trend towards automation and efficient supply chains. Additionally, defense-related demand in the U.S. is anticipated to revitalize older industrial corridors, creating a new class of specialized logistics assets.

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Hines, a global real estate investment manager, notes that shrinking trucking capacity could lead to double-digit rate hikes in 2026, further emphasizing the importance of well-located logistics real estate. The report highlights that warehouse net absorption is closely linked to manufacturing construction spending, suggesting a potential increase in demand for industrial facilities.

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Despite the positive outlook, challenges remain. The macroeconomic landscape is volatile, influenced by interest rate fluctuations and trade policy uncertainties. Guarino emphasizes that while tariffs may increase costs and complicate supply chains, strategically located industrial properties near ports are essential for maintaining supply chain resilience.

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• “Industrial property rents are showing signs of stabilization, indicating a more balanced market environment,” — Judy Guarino, Managing Director, JPMorgan Chase

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• “Despite the volatility in the macroeconomic landscape, driven by interest rate and trade policy uncertainties, industrial properties near ports remain vital,” — Judy Guarino, Managing Director, JPMorgan Chase

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• “It's an interesting inflection point for industrial developers and REITs that rode the pandemic-era boom,” — Juan Arias, National Director of Industrial Analytics, CoStar Group

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The warehouse real estate market is at a pivotal juncture, balancing the ongoing demand from e-commerce with the evolving needs of logistics and manufacturing, all while navigating economic uncertainties.

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