Market dynamics, power concerns, cost pressures and looming carbon reduction targets are pushing energy management and resilience to the forefront of leasing decisions in the industrial & logistics sector.

• Occupiers are prioritizing energy-smart buildings to drive operational excellence and cost efficiencies, impelled by concerns over power availability and surging energy prices in recent years.
• The sector faces heightened operational security threats from climate risk due to complex operations and a greater presence in areas more vulnerable to extreme weather events.
• Two-thirds of top industrial & logistics occupiers have commitments to reduce emissions, primarily through energy upgrades, fleet electrification and clean energy procurement.
• As inventory ages rapidly – with 76% of industrial stock over a decade old in the U.S., and 69% in Europe – retrofitting buildings emerges as a crucial strategy for owners to mitigate obsolescence risk, attract top tenants and enhance value.

To understand how sustainability commitments are impacting lease markets in the sector, JLL evaluated the leased footprint of major occupiers across 18 industrial & logistics hubs in North America, Europe and Australia, investigated publicly stated targets and relevant details and assessed current supply and construction pipelines.

Across the 900 occupiers researched in this study (representing 850 million square feet of leased space), we found that 65% of their future space needs will be tied to a carbon reduction target. In other words, nearly two out of every three future requirements for industrial space come from occupiers with established targets to reduce operational emissions, primarily through energy upgrades, fleet electrification and clean energy procurement.

Average lease terms are about seven years for industrial tenants, meaning that leases signed today will collide with 2030 targets to reduce emissions by 50%, an interim target that many of these occupiers have set. This will significantly impact their near-term leasing decisions, and many will need to re-evaluate their current spaces as they seek spaces aligned with their carbon reduction targets.

Tenant activities are typically responsible for 90% to 100% of operational carbon emissions in industrial buildings, compared to 55% to 75% in offices. This means that cooperation from tenants – especially in the form of co-investments – are particularly critical for successful decarbonization of the sector. In Australia, many landlords are already considering tenant screening processes and favoring tenants with lower operational carbon intensities as well as those willing to share data and collaborate on building performance improvements.

The industrial sector is uniquely positioned to scale energy and sustainability solutions that can drive real progress in decarbonizing the built environment, as well as operational security and economic value for both owners and occupiers.

Delivering energy solutions

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Delivering resilience

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Protecting value

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Given complex supply chains and operations as well as a greater presence in areas more vulnerable to extreme weather events, a warming climate presents acute challenges for the industrial & logistics sector. For example, across the U.S., 69% of industrial inventory sits in the top 10 markets most exposed to climate risk, compared to 57% for offices. In Europe, 49% of industrial inventory lies in the region’s 10 most exposed markets, compared to 42% for offices. Occupiers in this sector will increasingly look for properties that ensure business continuity and employee safety through enhanced physical resilience and onsite energy solutions.

In recent years, the surge in e-commerce, accelerated by the pandemic, drove unprecedented development for industrial real estate, particularly for logistics and warehousing uses. An important distinction for the sector overall, compared to offices, is that shorter construction timelines have allowed developers to be more responsive to changing market demands. Yet, 2025 is beginning with little to no new construction across major markets globally as development levels stabilize.

At the same time, inventory is aging rapidly in most established industrial & logistics hubs. In the U.S., 76% of stock is over a decade old, compared to 69% in Europe and 75% in Australia. Although some buildings over 10 years are still considered high quality, much of this aging stock will require some form of improvement to maintain competitiveness. Moreover, the scarcity of developable land in many industrial markets across the world, coupled with constraints on new supply, reinforces the imperative for upgrading existing facilities. These factors collectively strengthen the case for retrofitting as a key value-add strategy in the industrial & logistics real estate sector.