After several years of rapid expansion and disruption, the industrial real estate sector is entering a period of recalibration. Changes in global trade policy and new supply chain strategies are affecting demand. Additionally, the needs of occupiers are shifting. These factors are impacting various markets and asset types.
The manufacturing industry trends of 2025 continue to emphasize resilience, efficiency, and proximity to customers. Occupiers are reassessing where—and how—they deploy industrial space.
The following trends highlight key dynamics influencing the industrial market and where opportunities may emerge.
1. Flight to Quality
The flight to quality is not only increasing in the office market. Occupiers are also seeking upgrades in the industrial sector.
With a surge of new supply, tenants have more options. Older industrial buildings, particularly those constructed before 2000, are becoming less desirable. Tenants are increasingly favoring modern facilities that can accommodate automation, contemporary logistics workflows, high ceilings, and energy efficiency.
Advanced design and technology, including automation, robotics, and energy-efficient systems are more common and desirable.
Key Consideration: Upgrades or Repurposing – Developers are modernizing older buildings with additional dock doors and improved circulation, and power upgrades. Retrofits from antiquated warehouses to flex/R&D, light manufacturing, or urban logistics hubs are becoming more common.
2. Manufacturing Revival and Reshoring
Increased tariffs on imports, along with federal policy incentives like the CHIPS ACT and the OBBBA, are encouraging companies to bring their manufacturing operations back to the U.S. or closer to home.
This change is because of protective U.S. policies. Rising transportation and labor costs also make offshore production less practical. As a result, manufacturing-driven requirements are increasingly accounting for a larger share of new industrial demand.
Reshoring manufacturing is particularly prominent in sectors that involve high-value, technology-intensive, or strategic goods. In contrast, commodities with low value density, such as textiles, are likely to remain produced offshore.
Key Consideration: Resilience as Strategy – Increased emphasis on reshoring indicates a strategic shift toward supply chain resilience and risk reduction, prioritizing security over costs.
3. Regional Bifurcation and the Rise of Secondary Markets
Industrial demand is becoming geographically differentiated as the sector rides the tail-end of one of the largest industrial pipelines and deliveries in a generation. Some regions, especially well-situated secondary markets like Louisville and Nashville, continue to perform well.
Markets that have seen tremendous growth and rapid lease rate increases are becoming more tenant-friendly as the supply and demand remain out of balance.
Key Consideration: On the Border – Industrial markets on the southern border, such as El Paso and Laredo, experienced significant construction growth due to anticipated near-shoring. However, these areas currently have high availability rates. The transition of manufacturing operations takes time to become firmly established, creating an opportunity for businesses to secure more favorable lease packages before demand rises.
4. Rebalancing: Oversupply and Divergence by Size
The COVID pandemic led companies to focus more on inventory storage, which resulted in an increased demand for large box spaces (over 150,000 square feet). This surge in demand forced many occupiers to take spaces that might not have fully met their needs due to intense competition. Recently, many companies have sought to right-size their space requirements or have turned to the sublease market. In contrast, there is also a high demand for small-bay spaces (under 50,000 square feet).
Owners/landlords are subdividing big boxes into smaller, more liquid spaces through demising walls and adding multiple entrances and docks.
Key Consideration: Specialization – Retrofitting space to labs, R&D areas, and cold storage is becoming increasingly popular to attract tenants.
5. Tariffs and Policy Uncertainty
Tariffs have been broadly applied, with increases on goods from several countries and specific tariffs on products like wood, steel, and aluminum. As these tariffs continue to be imposed, the actual impacts on consumers, businesses, and the broader economy, including employment and inflation, are still being assessed.
The uncertainty of trade policies has caused many occupiers to delay long-term industrial investment decisions and space requirements.
Some tenants are adjusting space strategy by favoring shorter-term leases or flexible space.
Key Consideration: Looming Supreme Court Decision – Oral arguments were made to the Supreme Court on November 5, 2025, on the legality of tariffs sanctioned. A decision is expected to be released in early to mid-2025. If some of the imposed tariffs are eliminated, a complex refund process would be triggered for duties paid on goods entered while the tariffs were in effect.
As industrial markets transition from rapid expansion to a more balanced environment, occupier strategy is increasingly shaped by quality, resilience, and flexibility. The focus on quality is increasing.
Companies are bringing production back home faster. The manufacturing industry trends of 2025 are changing. These factors are shifting where demand is directed and how space is utilized in 2026 and beyond.
For occupiers, success will depend on aligning real estate decisions with operational priorities—whether that means upgrading facilities, entering emerging secondary markets, or maintaining flexibility amid policy uncertainty. Understanding these trends can help organizations position their industrial portfolios to support long-term growth in a changing global landscape.
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