JLL’s latest U.S. Industrial Tenant Demand Study reveals how tariffs and shifting trade flows are reshaping the market. Retail demand has fallen sharply, while 3PLs and manufacturers are expanding footprints through reshoring and inventory strategies. The Southeast stands out as a growth hub, driven by strong infrastructure, labor availability, and rising manufacturing investment.
Retail Retreat vs. Logistics Growth
Retailers are pulling back sharply, with space requirements down 17% year-over-year. In contrast, 3PLs, logistics operators, and distributors have grown demand by more than 13%, a divergence tied to tariff-driven inventory strategies and the growing reliance on outsourced logistics expertise. According to JLL, many Asian 3PLs have led frontloading efforts to hedge against tariff exposure, a trend also reflected in recent import patterns showing fewer China-origin shipments and greater activity from Southeast Asia and Mexico.
Decision-making timelines have stretched, with occupiers now averaging 11 months on the market compared to just 3.5 months during the pandemic. Short-term renewals are increasingly common as firms weigh long-term bets against volatile trade and cost conditions. Despite the slowdown, manufacturing now represents more than 19% of total industrial demand, a 9% annual increase, driven by regionalization strategies that prioritize proximity to customers and suppliers.
Regional Shifts and Sector Realignments
The Southeast continues to dominate U.S. industrial activity, accounting for more than a quarter of demand, with Atlanta, Savannah, and Greenville/Spartanburg emerging as regional anchors. Land, power, and labor availability remain decisive factors, particularly for energy-intensive advanced manufacturing and distribution facilities adapting to automation and EV adoption.
Industry-specific momentum is reshaping the market. Food and beverage demand grew nearly 16% in the Southeast alone, supported by the normalization of online grocery shopping and the need for urban cold storage. Consumer products also showed resilience, even as traditional retail contracted. Meanwhile, build-to-suit inquiries are up 117% since 2018, reflecting a structural shift toward asset ownership and long-term cost control. This signals that occupiers are increasingly focused on financial independence and operational stability, not just short-term flexibility.
Why the Real Test Lies Ahead
The sharp divergence between retail contraction and logistics expansion may appear to signal a straightforward rebalancing, but the bigger test will come when interest rate and energy cost pressures collide with long-term reshoring commitments. History shows that past industrial booms, such as the U.S. shale expansion, were undone as much by cost inflation as by policy shifts. For manufacturers and 3PLs banking on Southeast growth, the differentiator will be whether they can secure affordable, sustainable energy and infrastructure at scale. That factor, more than tariffs, may ultimately decide which regions emerge as lasting winners.