Developers Are Back to Building U.S. Warehouses
Industrial real estate under construction rose 18% in the second quarter, driven by demand from suppliers of data-center equipment
U.S. industrial real estate under construction rose 18% in the second quarter from 2025 to more than 305 million square feet.
The growth marks a shift from a yearslong slump in warehouse demand that had pushed vacancy rates to an 11-year high.
The rebound is driven by demand from data-center equipment suppliers, manufacturers, third-party logistics firms and retailers.
Warehouse developers are breaking ground on new buildings, betting that a yearslong slump in industrial real-estate demand is over.
More than 305 million square feet of warehouse space was under construction across the U.S. in the second quarter, up 18% from 2025 and the second consecutive quarter of annual growth, according to real-estate services firm Cushman & Wakefield.
“Developers hit pause for two years and now they’re hitting play again, but this time they’re following demand, not chasing it,” said Jason Tolliver, head of logistics and industrial real estate at Cushman.
The growing development pipeline is a significant shift from the slow construction activity of the past several years. Weak leasing activity and an overabundance of space combined to push the nationwide vacancy rate up to an 11-year high last year and led many developers to pare back construction plans.
New construction slowed down in 2024 and 2025 as developers focused on completing projects already in the works and leasing empty space. Tenants that had snatched up excess space during the pandemic dialed back their leasing amid uncertain consumer demand.
Demand for new space is now bouncing back. Companies leased more space in the second quarter than in any period since mid-2022, according to Cushman, giving developers confidence to start projects.
“We are finally at this point where the market is clearly turning a corner and has found its footing after a period where there wasn’t clarity on just how high vacancy would get,” said Mark Russo, head of industrial research at real-estate firm Savills.
Prologis, the world’s largest owner and operator of industrial real estate, said it plans to start work on $4.5 billion to $5.5 billion of developments this year, up from $3.1 billion last year. About 40% of its development starts this year are expected to be data centers as Prologis seeks to capitalize on demand for the infrastructure to power artificial intelligence. The company is due to report its latest earnings on Thursday.
Panattoni, one of the largest privately held developers in the world, is ramping up construction nationwide. The Irvine, Calif.-based company plans to start work on 62% more square footage this year than in 2025 and is working on preparing land for future development.
Still, the pipeline of construction is far below the level seen during the pandemic, when developers rushed to build warehouses to meet surging demand from companies looking to capitalize on soaring e-commerce growth. The amount of space under construction hit a pandemic-era peak of more than 725 million square feet in the third quarter of 2022, according to Cushman.
“We’re still cautiously optimistic, but nowhere near what it was three, four years ago. We’re just not in that mindset at this point,” said Doug Roberts, president of North American development at Panattoni.
Today, data-center operators and suppliers of the components needed to run the high-tech buildings are clamoring for warehouses to help fuel the rapid build-out of data centers nationwide. Leasing demand also is coming from retailers stocking up on inventory ahead of possible changes to U.S. tariffs, manufacturers bringing operations into the U.S., and third-party logistics providers seeking to meet the needs of companies looking to outsource fulfillment.
“Major companies have been on pause for quite some time now and are hitting a point where a decision needs to be made,” said Jeremy Garner, a managing director with real-estate developer Trammell Crow, a subsidiary of CBRE Group.
Garner said his company continued putting up buildings over the past few years in fast-growing markets such as Houston, where he is based. Coastal markets where work had slowed are “seeing green shoots now and reasons to move forward with more development,” Garner said.
Developers starting projects now are making a bet that leasing demand will continue to grow amid an uncertain economic outlook. The Federal Reserve has signaled it may raise interest rates this year if inflation stays elevated. Consumer sentiment remains near record lows. And companies bringing in holiday merchandise early to get ahead of rising costs due to tariffs and the Iran war are expected to reduce imports later in the year.
Henry Steinberg, head of EQT Real Estate, a division of private-equity firm EQT, said companies leasing new space are in part seeking to brace their supply chains against uncertainty after years of disruptions, from port backlogs and tariffs to natural disasters such as hurricanes.
“Tenants are realizing that with supply-chain volatility comes risk, and the best way to mitigate that risk is to create more diversity in the supply chain,” Steinberg said.