from 2020 to 2023, warehouse vacancies hit record lows as companies stockpiled safety inventory to mitigate disruption risks during the most volatile point in recent supply chain memory. Then, as the pandemic subsided and supply chain practices went back to something resembling normal, the industrial real estate sector began to experience a normalization from those record highs.

As a result, in 2024, the warehouse market was marked by too much inventory and higher vacancy rates, fueled by delivery on speculative projects that had broken ground during the last days of the pandemic frenzy. As such, 2024 is now largely being seen as a year of market correction.

Going into 2025, that correction is nearing its completion. Here are four factors that will help drive increasing demand for warehouses in 2025.

Supply chain resiliency remains a top goal for U.S. businesses, especially as new tariffs drive up the cost of trading with overseas partners and suppliers. To mitigate the risk of disruption, American companies will move production to U.S. soil where feasible and source more materials and finished goods from U.S. suppliers.

This will impact the warehouse market in two ways. First, businesses trying to stay ahead of any new tariffs will need more space to stockpile extra inventory. Second, companies that reshore their production assets will also need warehouses to store raw materials and finished product. Both of these factors should help push vacancy rates down as the year goes on.

Despite the volatility in the supply chain and the U.S. economy, American consumers have not backed off from buying the things they want online. With e-commerce expected to grow more than 8% in 2025, online and omnichannel sellers will need more space to accommodate that growth.

It is an accepted rule of industrial real estate that e-commerce operations take about three times more warehouse space than traditional brick-and-mortar retailers need from their warehouses. As such, steady growth of this type in e-commerce is always good news for the warehouse market.

Many retailers do not have comprehensive in-house logistics capabilities the way megaretailers like Amazon or Walmart do. This can make it challenging to compete in an arena where customers continually demand a wider array of delivery options and a higher level of service.

To meet those demands, retailers often choose to get help from third-party logistics (3PL) providers rather than making the massive upfront investment required to establish a national warehouse network and its associated logistics infrastructure. 3PLs led bulk industrial leasing activity in 2024, and this trend will continue in 2025 as companies strive to build more effective, disruption-resistant supply chains.

After years of soaring records followed by a painful normalization, the warehouse market in 2025 may start to feel familiar to those who have been in the industry since before the pandemic. While tenant and owner motivations and goals may be different, the market itself should reach a stable balance between supply and demand that looks like the pre-pandemic era.