The Nearshoring Warehouse Play
Min 1
Industrial leasing jumped 32.3% year-over-year in Q4 2024 while office vacancy hit record highs. Net absorption doubled from the previous quarter to 38.2 million square feet according to JLL, bringing year-to-date totals to 101 million square feet. The recovery happened faster than consensus expected because nearshoring and supply chain restructuring created structural demand independent of e-commerce cycles.
Third-party logistics providers captured 34.1% of bulk industrial leasing through Q3 2024, up from 30.6% the prior year. That expansion revealed companies outsourcing distribution operations to maintain import flexibility and capital preservation. Operators positioned near Mexico border crossings and major interstate corridors captured tenant demand that traditional port-proximity warehouses missed.
The nearshoring acceleration exposes which investors recognized that manufacturing relocation created permanent warehouse demand in secondary corridors while coastal gateway markets faced oversupply
Min 2
The demand drivers shifted from pandemic-era inventory stockpiling to structural supply chain redesign. Companies diversified import locations away from Asian concentration after experiencing disruptions from labor strikes, extreme weather, and geopolitical conflicts. That geographic diversification required warehouse capacity in markets closer to Mexico manufacturing rather than West Coast ports.
E-commerce share of total retail sales hit record 23.2% in Q3 2024 and CBRE projected 25% by year-end 2025. JLL estimated additional $900 billion in e-commerce sales would require more than one billion square feet of industrial real estate by 2025. E-commerce warehousing needs roughly three times the logistics space of traditional retail, sustaining demand even as pandemic surge moderated.
Markets like San Antonio, Austin, Dallas-Fort Worth, Oklahoma City, Kansas City, Des Moines, and Minneapolis gained strategic importance for companies needing proximity to Mexico border or interstate corridors. Operators acquiring warehouse assets in these secondary logistics hubs captured tenants relocating from saturated coastal markets.
Min 3
Industrial rent growth moderated to 2.8% by late 2024 from 3.9% earlier in the year according to CoStar data. That deceleration reflected supply-demand rebalancing as deliveries outpaced absorption temporarily. Vacancy rates edged to 7.6% but appeared to have peaked as new construction decelerated sharply.
NAIOP forecasted industrial net absorption would slow to 52.2 million square feet in H1 2025 before accelerating to 156.4 million square feet for the full year. The forecast projected 224.9 million square feet of positive absorption in 2026. Those numbers suggested temporary softness before structural demand reasserted itself as supply pipeline emptied.
Industrial development pipeline increased for the first time in 12 quarters to 246.8 million square feet in Q4 2024. That reversal signaled developers recognized supply shortage developing as speculative construction remained constrained by elevated debt costs. Operators acquiring existing warehouse assets before development pipeline refilled captured assets below replacement cost.
Min 4
Smaller operators competed effectively against institutions in secondary industrial markets where deal sizes fell below institutional minimums. Independent investors purchased 50,000 to 200,000 square foot warehouses in Midwest and South corridors while large funds focused on million-square-foot distribution centers in primary markets.
The competitive advantage emerged from operational flexibility and local market knowledge. Small operators converted older industrial buildings to modern standards through targeted capital improvements, creating Class A functionality at Class B acquisition pricing. Total basis stayed 30 to 40% below ground-up construction while delivering comparable rents.
Texas industrial markets showed particularly strong fundamentals driven by manufacturing activity in both Mexico and the state itself. Developers responded by building more space, pushing vacancy rates up temporarily. That softness created buying opportunities for operators willing to underwrite near-term lease-up risk for long-term occupancy stability.
Min 5
The industrial sector democratized access through smaller-format warehouse opportunities in secondary markets. Operators purchasing 100,000 square foot facilities in Nashville, Louisville, and Central Florida participated in industrial growth without competing for gateway market assets trading at compressed cap rates.
Onshoring and nearshoring trends continued attracting investment as businesses reduced dependency on overseas production. That capital flow reshaped industrial real estate markets by driving demand for warehouses, factories, and distribution centers across previously overlooked corridors. The trend proved more durable than pandemic-era inventory buildups because geopolitical uncertainties and supply chain vulnerabilities persisted.
Industrial assets targeting automation-ready facilities with sustainable features commanded premium rents. First-generation space with solar panels, electric truck charging stations, and AI-enabled inventory systems attracted tenants willing to pay 10 to 15% above market rates. Operators upgrading existing warehouses with these amenities captured rent premiums without new construction timelines.
Closing Takeaway
The nearshoring wave transformed industrial real estate from a port-proximity play into a Mexico-border and interstate-corridor opportunity. Third-party logistics providers expanded market share by offering import flexibility that single-tenant warehouses could not provide. Operators who recognized manufacturing relocation created permanent demand shifts positioned in secondary markets before institutional capital repriced those corridors. The fundamentals strengthen through 2026 as supply pipeline remains constrained and nearshoring accelerates. By the time industrial becomes consensus again, gateway market cap rates will have compressed and secondary corridor assets will trade at institutional pricing.
