Adapting to shifting trade policies: 5 predictions for industrial real estate

This year, the industrial real estate sector is poised for significant shifts, driven in part by evolving trade policies, including an unpredictable tariff landscape. President Trump’s statements have already initiated major discussions about potential tariffs, including 25% on goods imported from Canada and Mexico, up to 60% on Chinese imports, and even the possibility of 100% tariffs on goods from BRIC nations. With these potential changes on the horizon, it’s clear that global trade dynamics are undergoing profound transformations impacting industrial real estate as well.

As tariffs climb, corporations will reevaluate their supply chains and rethink their global footprints to mitigate financial strain and logistical challenges posed by new economic policies. As a result, industrial real estate will need to adapt to these changing demands, driving new trends and strategies within the sector.

Here are five key predictions for this year that will shape the future of industrial real estate:

1. Reshoring and nearshoring will gain momentum

The rising cost and complexity of international trade will make it less economically viable for companies to rely on overseas manufacturing and shipping. Rather than relying on a global supply chain that spans continents, businesses will focus on regionalizing their supply chains and manufacturing or sourcing products closer to the end consumer. This makes sense, regardless of trade policies, as it reduces freight cost, improves customer service and transit times, and reduces complexity and risk.

According to Harry Moser, founder and CEO of the Reshoring Initiative and a leading subject matter expert, reshoring activity surged from 2020 to 2023 due to CHIPS, IRA and geopolitical risk. Total U.S. manufacturing jobs added from reshoring in the last five years has been approximately 800,000.

Fact: According to an Accenture study of senior supply chain executives, by 2026, 65% of companies intend to buy most key items from regional suppliers, up from 38% today. 85% plan to make and sell their products in the same region by 2026, nearly doubling from 43% today.

Impact on industrial real estate:

• Increased demand for distribution and manufacturing sites and/or facilities in both Mexico and the U.S.
• Industrial parks located near major trade routes and transportation networks for improved regional distribution.
• Increased demand for scalable land sites with needed infrastructure (power, water), labor, and logistics.

2. Mexico is a big beneficiary of nearshoring

When it comes to nearshoring, manufacturing or sourcing closer to the U.S., Mexico has been and will continue to be one of the biggest beneficiaries. The Mexican government has challenges to overcome regarding their infrastructure but will be compelled to address these issues to expand its economy.

According to Moser, Mexico has announced hundreds of thousands of manufacturing jobs in the last four years. Changing economic policies strengthen the value proposition associated with reshoring and nearshoring activity, which is what the industry is seeing today.

Fact: By the end of 2023, U.S. imports from Mexico reached $480 billion, an all-time high. Laredo’s port of entry in Texas is the second-largest port of entry, with more than 2 million loaded truck crossings. The top four states impacted by both imports from and exports to Mexico are Texas, Michigan, California, and Illinois.

Impact on industrial real estate:

• Increased demand for distribution and manufacturing facilities in Mexico.
• Industrial parks located near major north/south trade routes and rail lines.
• A focus on logistics sites close to border regions and major crossing points.

3. Manufacturing creates a three- to five-times multiplier effect on industrial space

New manufacturing facilities require both upstream and downstream operational partners-suppliers, distributors and third-party logistics operators, all critical to the process of making the supply chain flow. This creates long-term demand for industrial real estate—both land sites and industrial space.

Fact: Since 2018, JLL’s manufacturing-related engagements have increased more than 350%. Demand for manufacturing sites and facilities is as strong as it has ever been in history, accounting for nearly 20% of overall requirements in 2024. JLL industrial research expects manufacturing-related requirements to continue to grow to as much as 30% of overall requirements by 2028.

Impact on industrial real estate:
 

• Greater demand for logistics hubs and distribution centers with access to multiple transportation modes (e.g., proximity to parcel hubs, ports, intermodal, highways).
• Increased demand for intermodal and proximity to intermodal terminals that allow for more seamless transitions between different transportation modes, focused on reducing freight costs.
• Huge adjacencies to manufacturing, such as increased demand for supplier-related manufacturing sites/facilities, supplier parks, and warehousing.

4. Increased investment in technology and automation

In a climate of rising tariffs and a tight labor market, companies will look to technology and automation to offset rising labor, transportation, and manufacturing costs. Automation in manufacturing and warehousing, robotics, and AI-powered supply chain optimization will become essential to stay competitive.

Fact: Since 2020, the U.S. has seen 350+ advanced manufacturing project announcements, 105,400,000-plus square feet of battery and EV facilities announced, and gigafactory capacity of 1,173 GW per hour.

Impact on industrial real estate:

• A demand for Class A building attributes including rooftop solar, EV chargers, and increased auto parking (1.5 per spot per 1,000 square feet).
• Increased requirements for power and ceiling clear heights of 32 to 36 feet.
• Increased focus on sustainability and energy efficiency, leveraging technology to reduce operational costs.

5. Power, people and land versus “location, location, location”

When outsourcing trends began 30+ years ago, companies did not just downsize their U.S. operations, they shut down these factories and laid off their workers. Today, many companies, given the sophisticated nature of their manufacturing processes and increasing reliance on automation, require an increased need for power, and often need to invest in new facilities. This drives up the already increasing demand for land sites with the needed infrastructure for advanced manufacturing operations (power, water, labor, logistics, etc.).

Fact: Attracting and retaining labor is still a top challenge for corporate occupiers. According to Greg Matter, who leads JLL’s Advanced Manufacturing practice, competition for labor in high-demand markets is eroding operational cost savings due to increased efforts to recruit and retain talent. This includes offering higher wages, relocation packages, and establishing retraining programs to broaden the labor pool.

Impact on industrial real estate:

• Increased demand for “pad ready” land sites as speed is essential to occupiers.
• Facilities will require increased power infrastructure (minimum 4,000 amps).
• Large land sites suitable to accommodate increased need for employee and trailer parking, and scalable for future expansion.

In 2025, industrial real estate will experience profound changes. Companies will increasingly prioritize supply chain resilience, technological investment and regionalization, all of which will have a lasting impact on the demand for industrial space.

What we know is that the regionalization of manufacturing will continue on a global scale. Manufacturing-related logistics and warehousing will continue to drive demand. Land sites with power, people and proximity will create big opportunities for growth.

We do not know exactly what will happen with trade policies and tariffs, but these are the issues JLL is following and trends we are seeing today working with our clients—the largest corporate occupiers in the world.

JLL will continue to monitor these trends and report back to you as we gain more insights and facts. 2025 will continue to drive more investments, full of opportunities for JLL, our clients, and the country.