There are indications that a Distribution Center (DC) boom may be about to happen. And while the geo-political and regulatory headwinds are still blowing, momentum is gathering to add warehouse space…and to do it in a big way.
Coming out of the COVID pandemic, heightened demand for warehousing space fueled a frenzied warehouse building spree that rolled into 2023. Since then the warehousing market has entered a period of uneven development as geo-political, regulatory rebuffs and other headwinds have tapped down building demand for warehouse properties.
This isn’t to say that the demand for warehousing space evaporated.
However, now a number of industrial real estate analysts believe the warehousing market is at an “inflection point” and beginning in late 2026 into 2027, there will be a rebound in warehousing construction.
“Inflection Point”: Opening the Big-Box
In a recently released report entitled “U.S. Warehousing Construction Set for Rebound in 2027”, Matthieu Kulezak, a senior analyst at Interact Analysis, introduced his research by stating, “2027 is shaping up to be a key inflection point for US warehouse construction.”
Matthieu isn’t alone in his belief that US warehousing is rapidly closing in on a building spree. Clarion Partners, in a June report, said much the same, stating, “The convergence of long-term structural drivers and emerging cyclical tailwinds suggests the industrial sector may be approaching an inflection point, with conditions increasingly supportive of new development.”
There are a number of industrial real estate market indicators now coalescing which underpin the conclusion of a near-term warehouse building surge. Among them is the return of the Big-Box to prominence. A research paper by the commercial real estate company Cushman & Wakefield entitled “Large-Format Deals Return” highlighted the Big-Box (warehouses over 500,000 sq/ft) demand on the upward swing in warehousing construction. The Cushman & Wakefield report notes that Big-Box deals are up 32% year-over-year, with third-party logistics providers (3PLs) and manufacturers tallying close to 66% of the total. What is telling in the report’s numbers is that newer, larger warehouse logistics facilities accounted for 64% or 113 million sq/ft of the net absorption. And as Matthieu writes, “Big-Box leasing activity, historically a leading indicator for broader market trends, is picking up.”
There are a number of reasons the logistics companies are looking for newer and bigger facilities. One of the main reasons is fairly simple, many of the warehouses are effectively obsolete and can’t efficiently or expeditiously handle the volumes of the supply chain.
And size is one of the best commercial attributes for handling the disruptions in the supply chain. Being lean is desirable when conditions are stable. But flexibility is the key to keeping a supply chain functioning during times of disruption. In a market environment featuring unpredictable uneven cargo flows, size helps smooth the peaks and troughs — especially when coupled with up-to-date warehousing features.
As Matthieu’s report points out there is a clear need for updated warehouses: “Modern tenant needs are materially different from much of the existing industrial inventory nationally, with 65% of square footage built prior to 2000 and 88% built prior to 2010. Nearly 10% is approaching or exceeds 50 years in age…These older assets typically lack features in demand by tenants, including sufficient clear heights, dock door density, ESFR sprinkler systems, ample truck courts, and layouts capable of supporting automation and robotics. For example, they often have clear heights below 24 feet versus 32–40+ feet expected in modern facilities and significantly lower dock door ratios.”
Quality the Drawing Card
This desire for modern warehousing has been described as a “flight to quality”. But quality doesn’t come cheap. Jason Price, Americas Head of Logistics & Industrial Research at Cushman & Wakefield explained, “With occupancy tightening and new supply limited, tenants are getting more strategic about both location and design,” Adding, “We’re seeing a strong focus on efficiency, total occupancy cost, and long-term operational performance.”
And there are some strong indicators that the rebound is already underway.
JLL (Jones Lang Lasalle), one of the world’s largest commercial real estate companies reported, “The [California] Inland Empire recorded exceptional leasing activity in Q2 2026, with 15.5 million sq/ft of new leases signed -the market’s strongest quarter on record. June alone accounted for 7.5 million sq/ft, underscoring the concentration of demand late in the quarter. Total gross absorption reached 13.0 million sq/ft in Q2, bringing the 2026 YTD total to 22.6 million sq/ft, another record-breaking period for the market. Activity was anchored by mega-box demand from third-party logistics (3PL), retail and consumer goods operators, with several transactions exceeding 400,000 sq/ft.
And JLL in their assessment of the results wrote, “In a market that has historically displayed a top-down recovery, the return of strong leasing activity from bellwether retail and consumer goods occupiers is an encouraging signal for the broader market and points to sustained demand over the coming quarters. Coupled with continued strong demand from Asian 3PL operators, logistics and distribution users, gross absorption is expected to remain elevated. Notably, 2026 YTD net absorption has outpaced construction deliveries for the first time in four years, marking an inflection point in supply-demand dynamics that should support continued fundamental tightening through year-end.”
Headwinds to Warehouse Construction?
While the warehousing recovery is already under way in some key regions in the US, there still are some headwinds influencing the market. The same geo-political and economic factors, such as tariffs, energy costs and conflicts, which contribute to supply chain disruptions, also influence construction decision-making.
It is a question of whether the rents or usage is worth the considerable investment that building a quality 500,000 sq/ft Big-Box facility will cost? And it isn’t just the building’s worth today but also into the future.
As Clarion’s report explains of the ‘build or not to build’ dilemma, “Development decisions are driven by forward-looking rent and yield-on-cost expectations, which can act as a limiting factor when current rents do not yet reflect improving fundamentals. In some markets, replacement rents exceed in-place rents. Developers require sufficient rent levels to justify construction costs and execution risks. When a gap exists between market rents and required rents, projects are delayed and new starts remain muted.”
In July, A.P. Moller-Maersk, one of the top three largest containership operators in the world, announced the August opening of a new $100 million 617,000 sq/ft fulfillment hub in Hopedale Massachusetts — a small suburb located 40 miles from Boston. In a sense, with one of the largest players in global logistics, building a large-scale fulfillment facility in a high-priced location, demonstrates the boom has already started.
