Q: I feel like I keep hearing about industrial real estate coming back. Why is that?

— Midwest broker dealer

A: There are a few important supply-demand drivers that give industrial logistics real estate market participants confidence right now: a price rebound driven by interest rate stabilization, a re-acceleration of e-commerce, rising demand driven by a strong economy and nearshoring, and falling new supply.

1. Price rebound

The past 2-3 years have been challenging for logistics real estate, with a reset of values in both the U.S. and in Europe.

Today, volatility appears to be easing as markets have received more clarity from central banks and interest rates have started to stabilize, which has set the stage for commercial real estate to begin its road to recovery. The recovery phase is also signaled by increasing transaction volumes and we are excited about what could follow.

Industrial Repricing Unfolding and Recovery Potentially Underway

2. Rising demand driven by a strong economy and nearshoring

In 2024, the U.S. logistics market finished with ~840 million sq ft of leasing, which was 6.1% higher than in 2023 and was the third best year on record¹.

We are seeing resilience firsthand across our logistics platform where tenants renewed at ~56% above previous rental rates on average.

In addition to a resurgence in e-commerce, a key driver of industrial demand is coming from onshoring and re-shoring of manufacturing following the pandemic, trade tensions and technological efficiencies.

In the New Economy, there is both a growing need and urgency for users to create a broader, more stable supply chain with more reliable production and delivery methods.

Recent estimates place pledged manufacturing investments at $530 billion, translating to a minimum of 270 million sq ft of new manufacturing projects going online between now and 2030².

The demand for industrial warehouse space is expected to increase further due to the ripple effect of supplier, distribution and labor networks that will emerge alongside manufacturing investments. In fact, estimates suggest that the reshoring of manufacturing could require more than 1 billion sq ft of logistical support in the next decade².

Nearshoring is Driving Investment Across Sectors and Geographies

3. Falling new supply

Q4 2024 was the eighth consecutive quarter of declining construction starts – down 77% off the Q3 2022 peak. This is due in part to developer liquidity constraints driven by higher borrowing costs and reduced bank lending³.

We expect new deliveries to fall ~50% YoY in 2025 and to decline by another ~20% in 2026 given the lack of new projects currently in the pipeline.

We believe this sets up for a positive supply and demand dynamic in 2H 2025 and beyond.

Quarterly Industrial Construction Starts

Quarterly Industrial Net Completions

We expect continued rent growth and appreciation in property prices given the stability of interest rates, re-acceleration in logistics demand and declining new supply.