Warehouse real estate is rebalancing. Here’s what to watch out for

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After a pandemic-induced surge and subsequent pullback, supply and demand for warehouse real estate is finally starting to balance out and show new signs of life.

E-commerce, which was the main driver of the recent expansion cycle, certainly hasn’t disappeared, but more and more people are returning to brick-and-mortar. Warehouse tenants now focus more on efficiency, power and location than square footage.

New developments have slowed and federal policies encourage manufacturing relocation, helping the sector counter still-high interest rates and economic uncertainty. Rent increases are no longer as strong as they were a few years ago, and in some markets they are even decreasing slightly due to oversupply.

“Industrial property rents are showing signs of stabilization, indicating a more balanced market environment,” said Judy Guarino, managing director of commercial mortgage lending at JPMorgan Chasein a note to investors.

Here’s what to watch out for in warehouses in 2026.

The big box subsector refers to large, modern distribution and warehouse facilities that serve as hubs for logistics, warehousing and e-commerce fulfillment. It accounts for about a quarter of the total industrial warehouse space in the United States.

Housing vacancies are near cyclical highs and new construction is contracting, industry data shows. In the first half of this year, new supply still outpaced new demand, but the gap has narrowed, according to a new study from Colliers. Third-party logistics companies, including delivery services such as Ryder and DHL that transport goods on behalf of a customer, are leading this demand.

“Third quarter demand significantly exceeded first half demand, which is another very strong indicator that supply and demand are starting to become more in balance,” said Stephanie Rodriguez, national director of industrial services at Colliers.

Across the 20 largest markets, the overall big-box vacancy rate increased 19 basis points to 11% in the first half, according to Colliers. New supply totaled 48 million square feet in the first half of 2025, far less than the 330 million square feet achieved at the peak of the cycle in 2023. Rents are expected to stabilize in the short term before starting to grow again.

Big box stores are a major segment of the overall warehouse real estate market, particularly driven by demand from online retailers and businesses seeking efficient supply chain operations. Recent economic and tariff policies have definitely dented this demand, but as these policies stabilize, increased demand could return. A fall in interest rates would be another driver.

The supply chain, which relies heavily on warehouse real estate, is also experiencing a transformation that could increase demand. In a report titled “Bold Predictions for 2026,” Prologis, the world’s largest logistics real estate company, cited specific supply chain trends to watch, including the following predictions:

1. E-commerce companies will account for almost 25% of new rental contracts next year, while the proportion of goods sold online will reach almost 20% globally by the end of the year.
2. The need for plug-and-play logistics facilities capable of supporting automation and manufacturing will be one of the top three global factors in location selection.
3. Defense-related demand in the United States and Europe will breathe new life into old industrial corridors and produce a new class of specialized logistics assets.
4. Declining road transportation capacity will drive double-digit rate increases in 2026, making transportation an even larger share of total supply chain spending and amplifying the value of well-located logistics real estate.

Energy appears to be one of the main drivers of real estate portfolios. Beyond the usual talk about e-commerce and the data center industry, energy availability and network densification are becoming important pricing catalysts, according to a recent report from Hines, a global real estate investment manager.

“As relocation/proximity demand continues to accelerate, albeit slowly and with somewhat uneven impact, opportunity also lies in energy-intensive infill assets that support faster, denser networks; where distance once provided an advantage, proximity now creates it,” according to the Hines report.

Further research by Hines shows that net warehouse absorption is correlated with manufacturing construction spending.

“This trend highlights another potential source of demand not only for industrial manufacturing facilities, but also for the warehouse subsector,” according to the report, which projects that reshoring alone could increase overall warehouse demand over the next five years by approximately 35 percent.

“Despite the volatile macroeconomic landscape, driven by interest rate and trade policy uncertainties, industrial properties near ports remain vital,” Guarino said. “Tariffs can result in increased costs and supply chain challenges, but these locations are critical to maintaining supply chain resilience and adapting to business changes. »

An example of the advantage of proximity: Amazon. Its logistics real estate strategy reflects a broader national trend, prioritizing efficiency, automation and proximity to consumers at scale, according to a memo from CoStar.

“This is an interesting inflection point for industrial developers and REITs that have benefited from the pandemic-era boom,” wrote Juan Arias, national director of industrial analysis at CoStar Group.

Arias pointed to a slowdown in leasing, noting that this year Amazon has occupied just 61 logistics properties, down from 100 in 2024 and as many as 300 in recent years. Its demand for larger facilities has reached a seven-year low, but it is still drawn to newer, taller buildings, with an emphasis on modern, efficient distribution centers, Arias said.

As with everything else, artificial intelligence and real estate technology are also making their mark on the warehouse industry. They help owners and operators analyze supply chains, traffic patterns and data more effectively, which is especially important for identifying potential warehouse locations. They also help manage inventory and predict maintenance needs, which reduces costs.