December 2025 Newsletter
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Looking Ahead to 2026
The holiday season is here—a time for family dinners, Christmas celebrations, and some much-needed rest and relaxation. As we enjoy the warmth of the season (and maybe a glass of eggnog by the yule log), it’s also the perfect moment to look ahead at what 2026 may bring for the industrial real
estate market.
Here are five key trends I believe will shape the year ahead for both landlords and tenants:
1. Power the Growing Demand
- Landlords: Data centers consumed about 4.4% of total U.S. electricity in 2023 and are projected to reach 6.7–12% by 2028. Power requirements won’t slow down in 2026. When planning spec builds, consider increasing original power capacity and explore alternatives like behind-the-meter gas generation or linear energy.
- Tenants: Automation and AI are driving higher power needs in warehouses. When scouting locations, look near data center hubs—these areas will see continued infrastructure upgrades to meet demand.
2. 100% Bonus Depreciation
- Landlords: This tax benefit is significant. Evaluate improvements that qualify and consult your accountant to maximize deductions.
- Tenants: Engage your landlord—what tenant improvements can qualify? There may be opportunities for a win-win scenario.
3. Trade Policy: Still a Factor
- Landlords: Review your rent roll and identify tenants vulnerable to policy changes. Consider “right-sizing” space and include cost escalation clauses tied to material indexes for build-to-suit projects.
- Tenants: Rising material costs will push rents higher. Budget accordingly and negotiate flexibility in lease terms, especially if you have renewals coming up.
4. Reshoring & Advanced Manufacturing
- Landlords: Prepare for a more diverse tenant mix. The Midwest is well-positioned with labor and power for advanced manufacturing users.
- Tenants: Manufacturing companies will find municipalities eager to attract jobs and investment. Distribution companies should target markets with established logistics to avoid competing for space with manufacturers.
5. Federal Reserve Rate Outlook
- Landlords: Expect one more rate cut in 2025 and possibly another in 2026, with the federal funds rate projected at 3.4% by year-end 2026. Borrowing costs should stabilize—time to revisit delayed construction or improvement plans.
- Tenants: Similarly, if you’ve been waiting for rate cuts to invest in equipment or technology, 2026 may be the right time. This could also spur new speculative development and create fresh opportunities.
