The following is part of the Journal of Commerce's 2026 Annual Review and Outlook.
The big picture: Demand from third-party logistics providers (3PLs) is fueling continued growth in US warehousing and fulfillment space, despite relatively high national vacancy rates and depressed freight volumes. In the longer term, the big opportunity for industrial real estate developers is in data center development, which will continue to drive construction for several years.
A look back: After years of rampant construction, many of the warehousing projects that were launched during the COVID-19 pandemic came online in 2025, creating more capacity and raising vacancy rates. The national US industrial vacancy rate rose to 7.6% in the third quarter from 6.8% in the same 2024 period, exceeding the pre-pandemic average of 7.1%, according to real estate services firm Jones Lang LaSalle's (JLL's) latest US Industrial Market Dynamics report. Waves of US imports frontloaded ahead of higher tariffs — and the changing distribution needs created by those tariffs — helped fill some of that space. And certain sectors, such as bonded warehousing, saw especially high demand due to the tariff uncertainty. At the same time, demand for newer, larger, more sophisticated facilities with technology, especially AI, built into their design continued to grow.
“More than 41% of our addressable population are now using our proprietary AI tools daily, up from 35% earlier this year,”JLL CEO Christian Ulbrich said during a Nov. 5 earnings call. US leasing volume totaled 146.2 million square feet in the third quarter, the highest since the first quarter of 2024, while the US development pipeline increased to 246.8 million square feet, the first increase in 12 quarters, JLL said in the report.
A look ahead: Developers expect vacancy rates to drop as shippers that had been paralyzed by US tariff uncertainty set more long-term plans in motion. E-commerce trends that helped launch the pandemic-era warehousing boom are still in place, and 3PLs are looking for new, multi-use facilities for their shipper clients. But AI data centers are likely to steal the limelight in the industrial construction market.“Inevitably, it's going to be a big build cycle over the next five years, maybe longer,”Robert E. Sulentic, CEO of CBRE, said during an October earnings call.“We expect data centers to be around 10% of our earnings this year, and more next year.”
Although they employ relatively few people once completed, data centers require large amounts of land and energy. Those developments will compete with logistics warehousing, which also requires increasing amounts of land. Even as companies absorb projects begun two or three years ago, they are still adding facilities to their networks to build greater density and position their operations even closer to customers. Buildings that were once basically empty“shells”are now filled with robots and conveyor systems, Sulentic said.
The next inflection: The logistics warehousing market didn't tighten as expected in 2025, and developers are cagey about when a real resurgence may take place. The fact that shippers and their logistics partners are becoming desensitized to“short-term noise,”as Prologis executives put it, about tariffs bodes well for demand. “Overall, they need to make these long-term decisions and can no longer be held back,”CFO Timothy Arndt said during the developer’s third-quarter earnings call.