Real estate warehouses restore balance. Here’s what to watch out for

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olek. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. subscription To receive future issues, directly to your inbox.

After the pandemic-induced boom and subsequent decline, supply and demand for warehouse real estate are finally beginning to balance and showing new signs of life.

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

New development has slowed, and federal policies are pushing manufacturing back onshore, helping the sector cope with still-high interest rates and economic uncertainty. Rent increases are no longer as steep as they were a few years ago, and in fact are declining slightly in some markets due to increased supply.

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

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

The large subsector refers to large, modern distribution facilities and warehouses that serve as logistics, warehousing and e-commerce fulfillment centers. It makes up about a quarter of the total industrial warehouse space in the United States

Vacancies are approaching a cyclical peak, and new construction is shrinking, according to industry data. In the first half of this year, new supply still outpaced new demand, but the gap has narrowed, according to new research from Colliers. This demand is being driven by third-party logistics companies, including delivery services such as Ryder and DHL that move goods on behalf of the customer.

“Demand in the third quarter far exceeded the first half of the entire year, which is another strong indicator that supply and demand are beginning to reach a balanced state,” said Stephanie Rodriguez, national director of industrial services at Colliers.

In the 20 largest markets, the overall vacancy rate at large funds 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, well below the 330 million square feet completed at the peak of the cycle in 2023. Rents are expected to stabilize in the near term before they begin to grow again.

Big-box is a key part of the overall warehouse real estate market, particularly driven by demand from online retailers and companies seeking efficient supply chain operations. Recent economic and tariff policies have certainly shaken this demand, but as those policies stabilize, more demand could return. Low interest rates will be another driver.

The supply chain, which relies heavily on real estate warehouses, is also undergoing something of 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 predictions that:

1. E-commerce companies will account for nearly 25% of new rentals next year, with the proportion of goods sold online rising to nearly 20% globally by the end of the year.
2. The need for energy-ready logistics facilities capable of supporting automation and manufacturing will be the three most important factors globally in site 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. Shrinking trucking capacity will cause rates to rise by double digits in 2026, making transportation a larger share of total supply chain spending and inflating the value of well-located logistics real estate.

Strength emerges as a key driver across real estate portfolios. Beyond the usual narrative of e-commerce and the data center sector, energy availability and network densification are becoming important pricing drivers, according to a recent report from Hynes, a global real estate investment management firm.

“While demand for resupply/proximity transportation continues to pick up speed, albeit slowly and with somewhat uneven impact, opportunity also lies in packaging assets with strong advantages that support faster, denser networks; where distance was once the advantage, proximity now creates it,” Hynes reports.

Additional research by Hines shows that net warehouse absorption correlates with building and construction spending.

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

“Despite the volatility in the macroeconomic landscape, due to uncertainty over interest rates and trade policy, industrial properties close to ports remain vital,” Guarino said. “Tariffs may lead to higher costs and supply chain challenges, but these locations are key to maintaining supply chain resilience and adapting to trade shifts.”

Example of proximity feature: Amazon. Its real estate logistics strategy reflects a broader national trend, prioritizing efficiency, automation and proximity to the consumer at scale, according to a memo from Costar.

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

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

As with everything else, artificial intelligence and proprietary technology are leaving a mark on the warehouse sector as well. They help owners and operators analyze supply chains, traffic patterns and data more efficiently – which is especially important in identifying potential warehouse locations. They also help with inventory management and forecasting maintenance needs, both of which reduce costs.