Inside Industrial Real Estate Research: What Drives Warehouse Demand, Rents and New Supply

By Sam Laird

Industrial real estate research helps owners, investors and tenants decide where warehouse space will be needed, what it will be worth and how much more can be built. Matthew Rand is managing director of Research & Analytics at Link Logistics, where his team studies market trends and data across North American industrial markets. In this Q&A, Matt explains what’s driving warehouse demand, why tariffs and reshoring change where tenants want space, how researchers forecast individual markets, and how satellite imagery and AI are changing his work.

What is the role of research in industrial real estate, and how do owners, investors and tenants use it? 

Matt: Industrial real estate research works much like equity research: It identifies what drives an industry, forecasts where that industry is headed and informs decisions about what to buy, hold or sell. My background is in investment research, and the questions aren’t that different here. Which industrial buildings are worth owning, and which are worth selling? Is the market structure changing? Is a tenant industry shifting in a way that means it will need much more warehouse space, much less or a different kind of space than it has in the past?

One shift we’ve focused on is location. Twenty years ago, where an industrial site sat within a metropolitan area didn’t matter much. Sites were largely interchangeable, and you could keep building new ones. Today, warehouse location matters a great deal, because tenants run optimization models to reduce transportation costs by getting closer to their customers. That means more sites, and closer ones. We won’t always be a step ahead, but we should be able to identify what our customers are doing, why they’re doing it and what it means for the market. And if we’re lucky, we can anticipate things that haven’t happened yet.

What are the biggest trends shaping industrial real estate demand right now?

Matt: Faster delivery, data center spillover and aerospace and defense are the three biggest trends driving industrial real estate demand right now. Delivery speed has been shaping the market for years. It first drove bulk demand, and now it’s moving into mid-sized space as networks mature and e-commerce companies add more locations to delight their customers with faster service.

The second driver, data center spillover, is relatively new. It’s not the data centers themselves leasing warehouse space—it’s the companies that make and store the equipment needed to build, run and maintain them, such as HVAC systems, power equipment, server racks and cooling towers. That has driven far more demand than we would have expected, roughly 2 million square feet of warehouse space for every gigawatt of data center construction. It has accounted for about 15% of our overall leasing this year, and 30% to 40% in the markets where it’s most concentrated.

The third is aerospace and defense. We’ve seen a meaningful amount of aerospace-related demand for warehouse space along the Florida coast, and defense technology companies are adding research and development space in Los Angeles. A handful of other industrial markets are just starting to see this ramp up. Federal priorities around reshoring defense supply chains are a big part of that, because much of what’s made today depends on overseas suppliers.

How do tariffs, reshoring and supply chain shifts affect warehouse demand?

Matt: Tariffs, reshoring and supply chain shifts change where tenants need warehouse space more than how much space the economy needs overall. The superstore era of the 1990s moved production overseas for almost everything. That reduced costs considerably, but it also created a fragility in supply chains that became obvious as soon as COVID hit. Companies and governments have responded in different ways, from bringing production back to the U.S. to creating economic incentives for domestic manufacturing. 

On the consumer side, the impact is limited. When a package arrives at your house, it doesn’t matter where the product was made. It moves through the same consumption side of the supply chain and the same warehouses along the way. On the inbound side, the impact can be significant. Does freight arrive through an East Coast port or a West Coast port? Is it manufactured domestically or coming up through Mexico? Is there a whole chain of suppliers working together nearby? Those answers can change geographic preference. They can mean the difference between another warehouse in the Inland Empire and one in Columbus, or between needing hubs in Dallas and Atlanta instead of staying concentrated in Pennsylvania.

How do researchers forecast industrial real estate demand and rents in a specific warehouse market?

Matt: Forecasting an industrial real estate market starts with the fact that every market connects to the national and global economy, but in a different way and to a different degree. Some factors matter everywhere, including interest rates, population growth, GDP and consumption. Others matter only locally. Energy prices, for example, can be important in Houston and far less so in Seattle. A market with a lot of bulk warehouse space, like Columbus, can hold up well even when its local economy softens, because national bulk demand keeps it strong. Markets like Houston and Dallas are driven more by local population growth, which doesn’t track the national picture as closely. So part of the work is studying historical relationships, and part is understanding who an industrial market’s tenant base really is and why they use it.

Without getting into specific model structures, the approach blends a national, top-down view with a local, bottom-up view, and the two inform each other. Industrial real estate markets with plenty of data and unique drivers contribute more to the national picture than they absorb from it. Markets with less data lean more on national trends. The relationships are often intuitively simple, but capturing them correctly in the math is complicated, and you have to leave room for factors that didn’t exist before. A model of industrial demand built in 1995 would probably have worked well, but it wouldn’t have known it was missing e-commerce. E-commerce had no measurable effect for years, until it suddenly had a very large one. That’s why researchers have to take a view on what’s becoming more important and what’s becoming less important. Otherwise you’re just predicting the current environment.

Supply requires the same discipline. If a model wants to build a lot of space in a warehouse market but a parcel-by-parcel review shows there aren’t many developable sites left, we constrain the supply forecast, and then we have to think through what that constraint means for demand and for the balance between the two.

Beyond vacancy and absorption, what indicators show how healthy an industrial real estate market is?

Matt: One of the most useful indicators is the ratio of warehouse space leased to warehouse space available, because it shows how determined tenant demand really is. We start with availability, which is vacancy plus any warehouse space where a tenant has given notice and the space is being marketed, minus any vacant space that’s already been leased. Then we compare actual leasing against that number.

Think about buying a stock. You can buy $5 million of a company at the price on the screen, but if you try to buy $500 million, the price changes because the sellers aren’t there. Demand and supply in industrial real estate work the same way. It’s not just how fast demand and supply are growing, but how much industrial space was leased relative to how much was on offer, whether available or under construction. If that ratio is high relative to a market’s history, there’s real tension: Tenants are pushing through even though there isn’t much space, which pushes warehouse rents higher. That’s a strong market. If there’s a lot of space on offer and almost nobody is leasing, that tells you the market is weak, because some leasing normally happens just by virtue of the warehouse space being available.

What factors will affect warehouse rents and new supply in the coming years?

Matt: On the demand side, the biggest factors to watch are e-commerce growth, delivery speeds, onshoring, aerospace and defense, and pharmaceutical manufacturing. If you only tracked those, you’d probably do alright. Population growth matters too, along with a host of secondary factors.

On the supply side, we now track every warehouse site under construction across the country using satellite imagery. If you see a forest and then it’s been cleared and a road and a foundation have gone in, something is probably happening there in the near term. If nothing is starting, you know there’s no new supply coming. That lets us clean up our assumptions about what is and isn’t under construction and understand how quickly developers will react to demand and how much more space can come online. We combine that with our own view of which sites are developable, and our investment teams mark what status they think each project is in.

We also look at whether the economics support development. If the economics are there to start projects and developers still aren’t starting them, that points to structural constraints on building in that market, which tends to benefit owners of existing warehouses.

How is AI changing the way industrial real estate research is done?

Matt: AI is changing industrial real estate research in two main ways. The first is rapid prototyping. We used to build large datasets and be proud of the work, but nobody looked at them. Nobody knew they existed, and the files were too big to send around. Now we can quickly stand up simple apps that let people interact with the data. They won’t win any user interface awards, but they work, and they’ve given us something close to a single source of truth about what’s happening in our markets that everyone in the company can contribute to and agree on. We can communicate things we think are changing much faster.

The second is turning unstructured information into structured data. In the past, we were limited to data that someone had already cleaned up, whether we bought it or found it online. Now we can build our own. We track permits for under-construction activity across dozens of municipalities, each with a different website. Building that many separate scrapers by hand wouldn’t have been worth anyone’s time, but AI makes it fast. The same goes for property images. If you want to know which of your sites have a concrete truck apron, AI can review a very large number of properties and tell you.

Explore Link Logistics’ warehouse and distribution space for lease to learn more about industrial real estate opportunities across North America.