Warehouse real estate is being rebalanced. Here's what you should keep in mind

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After a pandemic-fueled 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 boom cycle, certainly hasn't gone away, but more and more people are returning to physical stores. Warehouse tenants are now focusing more on efficiency, energy and location than square footage.

New development has slowed and federal policies are driving manufacturing offshoring, helping the sector offset still-high interest rates and economic uncertainty. Rent increases are no longer as steep as they were a few years ago, and in some markets they are actually falling 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.

This is what needs to be taken into account in warehouses in 2026.

The department store subsector refers to large, modern warehouse and distribution facilities that serve as hubs for e-commerce logistics, warehousing, and fulfillment. It represents about a quarter of the total industrial warehouse space in the US.

Vacancies are near cyclical peaks and new construction is contracting, according to industry data. In the first half of this year, new supply still exceeded new demand, but the gap narrowed, according to new research from Colliers. Third-party logistics companies, including delivery services like Ryder and DHL that transport goods on behalf of a customer, are leading that demand.

“Third-quarter demand has far exceeded the entire first half of the year, which is another really strong indicator that supply and demand are starting to reach a more balanced state,” said Stephanie Rodriguez, national director of industrial services at Colliers.

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

Big-box is an important segment of the overall warehouse real estate market, driven particularly by demand from online retailers and companies seeking efficient supply chain operations. Recent economic and tariff policies have definitely shaken that demand, but as those policies settle, more demand could return. Lower interest rates would be another factor.

The supply chain, which relies heavily on warehouses, is also undergoing a transformation of sorts that could increase demand. In a report titled “Bold Predictions to 2026,” Prologis, the world's largest logistics real estate company, cited specific supply chain trends to watch, including forecasts that:

1. E-commerce companies will account for almost 25% of new leasing next year, as the proportion of goods sold online rises to almost 20% globally by the end of the year.
2. The need for turnkey logistics facilities capable of supporting automation and manufacturing will be one of the top three factors globally in location selection.
3. Defense-related demand in the United States and Europe will breathe new life into older industrial corridors and produce a new class of specialized logistics assets.
4. Reduced trucking 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 is emerging as a leading driver in real estate portfolios. Beyond the usual narrative of the e-commerce and data center sector, power availability and grid densification are becoming important price catalysts, according to a recent report from Hines, a global real estate investment manager.

“While demand for re/near-shoring continues to accelerate, albeit slowly and with somewhat uneven impact, the opportunity also lies in energy-advantaged infill assets that support faster, denser networks; where distance once drove the advantage, now proximity creates it,” according to the Hines report.

Additional research by Hines shows that warehouse net absorption has been 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 their report, which predicts that reshoring alone could increase overall warehouse demand over the next five years by approximately 35%.

“Despite volatility in the macroeconomic outlook, driven by uncertainties over interest rates and trade policy, industrial properties close to ports remain vital,” Guarino said. “Tariffs can lead to higher costs and supply chain challenges, but these locations are key to maintaining supply chain resilience and adapting to trade changes.”

An example of the advantage of proximity: Amazon. Its logistics real estate strategy reflects a broader national trend, prioritizing efficiency, automation and consumer proximity over simple scale, according to a note from Co-star.

“It's an interesting inflection point for industrial developers and REITs that took advantage of the pandemic-era boom,” wrote Juan Arias, national director of industrial analysis at CoStar Group.

Arias highlighted a slowdown in leasing, noting that this year Amazon has occupied only 61 logistics properties, down from 100 in 2024 and up to 300 in recent years. Its demand for larger facilities hit its lowest level in seven years, but it is still attracted 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 sector. They are helping owners and operators analyze supply chains, traffic patterns and data more efficiently, which is particularly important for identifying potential warehouse locations. They also help manage inventory and predict maintenance needs, reducing costs.