The industrial real estate sector is undergoing a transformation as shifting trade policies, supply chain adjustments, and technological advancements reshape demand. Companies are already rethinking their logistics strategies in response to global trade dynamics, but is it possible that the rise of AI and cloud computing will drive a wave of industrial properties being repurposed into data centers? Meanwhile, industrial markets across the U.S. continue to expand, with long-standing powerhouses maintaining their dominance while cities like Columbus, Cleveland, and Richmond emerge as rising industrial hubs.
As the market watches the tariff back-and-forth unfold, the Trump administration has made last-minute adjustments to its latest trade measures. On March 5, the administration delayed a 25% tariff on auto imports from Mexico and Canada for one month and granted temporary reprieves on certain other goods, with a new deadline set for April 2.
The broader policy of trade protectionism is already prompting companies to reassess supply chains and trade strategies. While the temporary exemptions provide short-term relief, uncertainty looms over how trade policies will evolve in the coming months.
Meanwhile, shifting technological needs and land constraints in major data center markets could position industrial real estate as a key player in the next phase of digital infrastructure expansion. With industrial development booming in both established and emerging metros, the sector is at a critical turning point—and the next wave of investment opportunities is already underway.
“With surging demand for logistics hubs, Al-powered data centers, warehouses, and distribution centers, investors continue to keep industrial properties in their cross hairs,” noted Dianne Crocker, research director at LightBox. “As digital infrastructure and e-commerce scale exponentially, the future of industrial real estate won’t just be about space. It will be about smart site selection strategies that focus on power, connectivity, and adaptive reuse in this era of dramatic shifts in property use.”
The Industrial Markets that Are Heating Up
The U.S. industrial real estate market is experiencing rapid expansion in traditional markets as well as in new geographies. Long-standing industrial powerhouses like Dallas-Fort Worth, Houston, and the Inland Empire continue to attract major investments due to their strong infrastructure, strategic locations, and access to key transportation networks. Meanwhile, markets such as Columbus, Cleveland, and Richmond are seeing a surge in industrial development, fueled by reshoring efforts, supply chain shifts, and increased demand for logistics and manufacturing space.
Dallas-Fort Worth remains one of the most sought-after industrial real estate markets, leading the nation in absorption and investment volume. In 2024, the metro closed nearly $6 billion in industrial transactions, and leasing activity remains strong, with companies continuing to expand their distribution networks. Nike recently signed a lease for more than 1 million square feet in southern Dallas County, establishing a regional distribution center aimed at reducing its reliance on West Coast ports. The facility, located at the Southport Logistics Center, underscores the metro’s role as a key logistics hub, offering direct access to major highways, rail lines, and a growing labor force.
Inland Empire continues to be a vital player in the national supply chain, driven by its proximity to the ports of Los Angeles and Long Beach. Even with rising industrial costs, the region remains one of the most competitive for logistics and distribution, with low vacancy rates and consistent rental growth, according to JLL’s Q4 2024 report.
Houston’s industrial market remains strong according to Cushman & Wakefield’s Q4 report, driven by port activity, energy sector expansions, and ongoing demand for large-scale distribution space. In Q4 2024, leasing activity totaled 9.8 million square feet, reflecting steady interest from logistics and manufacturing tenants. Annual absorption reached 18.3 million square feet, underscoring sustained industrial growth despite a slight increase in vacancy rates to 7.5% due to new supply outpacing demand.
Among the emerging markets, Columbus, Ohio has seen a dramatic increase in industrial investment, largely due to its central location and well-developed logistics infrastructure. Anduril Industries is building a $1 billion, 5-million-square-foot production facility near Rickenbacker Airport, a project expected to create over 4,000 jobs by 2035. BJ’s Wholesale Club is also expanding its footprint in the region, with a new 500,000-square-foot distribution center set to open in 2027.
Buckeye, Arizona, has rapidly transformed into a major industrial hub, drawing a mix of large-scale distribution centers and advanced manufacturing facilities. Retailers such as Five Below, Funko, and Ross have established expansive warehouse operations in the area in the past four years, capitalizing on Buckeye’s growing logistics infrastructure and access to major transportation corridors. Beyond retail distribution, the city is also seeing an influx of manufacturing investments. Companies like Rehrig Pacific Co., a leader in sustainable packaging solutions, and Blue Polymers, a firm specializing in recycled materials, have chosen Buckeye as a strategic location for production facilities.
As companies adapt to trade shifts, reshoring efforts, and supply chain challenges, both traditional
and emerging industrial markets are experiencing rapid growth. “Industrial investment is no longer
just about warehouses—it’s about positioning for the future,” emphasized Crocker. “As companies respond to changes in their supply chains, embrace nearshoring, and scale Al-driven infrastructure, the strongest opportunities for industrial investors will emerge where logistics, technology, and market access converge.”
Reshoring Is Accelerating Demand for Logistics and Manufacturing Space
The push to bring manufacturing back to the U.S. has gained traction in recent years, and the latest tariffs are further driving companies to relocate production domestically. Over the past two months, several major companies have announced plans to reshore manufacturing operations to the United States in response to shifting trade policies and supply chain concerns.
Eli Lilly and Co. recently unveiled plans to establish four new U.S. manufacturing “mega-sites” over the next five years, aiming to reduce reliance on overseas suppliers while creating 3,000 permanent jobs and 10,000 construction jobs. Three of the sites will produce active pharmaceutical ingredients, while the fourth will focus on manufacturing injectable therapies.
Similarly, Taiwan Semiconductor Manufacturing Company (TSMC) announced a $100 billion investment to build three advanced semiconductor manufacturing plants in the U.S., including a research and development center in Arizona. The expansion is part of TSMC’s strategy to lessen dependence on foreign production and strengthen its U.S. footprint.
Apple has also joined the reshoring movement, recently committing to invest $500 billion in U.S. manufacturing and create 20,000 jobs. This initiative includes the development of a new server-manufacturing site in Houston, reinforcing Apple’s goal of bolstering domestic production and reducing reliance on overseas supply chains.
Meanwhile, Honda has adjusted its strategy in response to tariffs, shifting production of the next-generation Civic Hybrid from its planned facility in Guanajuato, Mexico, to its plant in Greensburg, Indiana. Originally set to launch in Mexico in 2027, the Civic Hybrid will now be manufactured in the U.S. starting in 2028, a move aimed at avoiding the recently imposed 25% tariffs on imports from Mexico and Canada. The Indiana facility is expected to produce around 210,000 Civic Hybrids annually.
Could Industrial Warehouses Be Repurposed as Data Centers?
As demand for digital infrastructure surges, the question arises: Could well-located logistics properties be converted into data centers? The rapid growth of AI, cloud computing, and data processing has put pressure on real estate markets to accommodate the power and space needs of modern data hubs. While industrial properties seem like a natural fit due to their size and location, large-scale conversions remain rare, with most new data centers being built from the ground up due to their specific environmental requirements.
Prologis’ recent move suggests that this could change. In December 2024, the logistics giant, in partnership with Skybox Datacenters, sold a newly developed, high-capacity data center in Illinois to HMC Capital. The facility, which had previously been an industrial warehouse, now boasts a marketed capacity of 32 megawatts (MW), showing that well-located logistics properties can be viable candidates for digital infrastructure. Chris Curtis, Prologis’ global head of data centers, has hinted at more conversions to come, noting that the company’s extensive portfolio of 5,600 buildings and 12,400 acres of land provides ample opportunities for transformation.
However, converting warehouses into data centers is not without challenges. Industrial properties were not originally designed for the power, cooling, and connectivity demands of hyperscale data facilities. Retrofitting these structures requires significant upgrades, and in some cases, it may be more cost-effective to develop data centers from scratch. That said, rising land constraints in primary data center markets, coupled with the push for faster development timelines, could make industrial-to-data center conversions a more attractive option in the future. If Prologis’ strategy proves successful, other logistics real estate firms may follow suit, signaling a potential shift in how industrial space is repurposed for the digital age.
The Next Industrial Boom
Industrial real estate is undergoing a fundamental shift, driven by tariffs, reshoring, and the rapid evolution of logistics and digital infrastructure. The demand for warehouse space is surging in some regions while others see industrial properties repurposed for entirely new uses, from advanced manufacturing to high-density data centers. The highly publicized TSMC underscores that a larger movement toward U.S.-based production is underway, reshaping supply chains and real estate markets in ways that are only beginning to unfold.
The real question is: Who will adapt, and who will be left behind? Developers who anticipate demand shifts, investors who identify emerging industrial hubs before they peak, and companies that future-proof their supply chains will come out ahead. The next chapter of industrial real estate is evolving, and with it, new investment opportunities are emerging as sites are developed to serve the changing needs of the market.
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