Five years ago, when the pandemic pushed e-commerce to new highs, the industrial warehouse space became the biggest commercial real estate play around. It began to slow in 2022, but now economic uncertainty brought on by constantly changing tariff policy and persistently high inflation is taking a greater toll on this previously hot real estate sector.
Just 27 million square feet of space was absorbed in the first half of this year, with demand falling by 11.3 million in the second quarter alone, the first quarterly drop since 2010, according to a report from NAIOP, a commercial real estate development association.
Since the uncertainty is likely to continue through the end of this year, NAIOP therefore projects that net absorption will be “nearly flat” over the second half of this year.
“Demand for industrial space is expected to recover somewhat after occupiers have time to adjust to a new tariff regime,” the report’s authors said. “However, higher tariffs and slowing employment growth will likely result in slower demand growth than that experienced from 2020 to 2022 or in the six years that preceded the pandemic.
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