The impact of e-commerce on US warehouse demand

The rise of online shopping has reshaped real estate, from mega fulfilment hubs on city fringes to nimble last-mile depots closer to home. As e-commerce keeps scaling, one question keeps popping up: how much more space will it need?

What e-commerce demand looks like in the world of warehouses

Online retail in the US passed $1.1 trillion in 2023, according to the US Census Bureau. That number’s growing, but what matters more is the impact behind the scenes. When customers expect faster delivery, companies need to store more stock in more locations. Not just any space will do.

Old warehouses on the edge of town don’t cut it anymore. Retailers and logistics firms are looking for higher ceilings and sites with fast access to major highways. The shift is showing up in how industrial space is used, where it’s built and who’s leasing it.

Some markets are absorbing space quickly, especially around key ports and big population hubs. Others are still adjusting as supply from the last building boom comes online. But the overall direction is clear in that modern, well-placed warehouses have become fundamental to how e-commerce works.

Industrial demand goes beyond Amazon

Amazon might dominate the headlines, but it’s only part of the story. While the tech giant has pulled back on some of its expansion plans, others are still growing into the space it created. Third-party logistics providers and regional couriers are signing long-term leases in key distribution corridors.

Some of the demand is coming from retailers that once relied on just-in-time supply chains. After the disruption of the past few years, many are choosing to hold more inventory closer to their customers. It’s a shift that has created a steady need for smaller, flexible warehouse units that can serve local or regional areas.

There’s also growing interest from newer sectors, like cold storage and returns processing. They are playing a bigger role in how goods move and require specific types of space. As a result,  some older assets are harder to lease and newer, built-for-purpose warehouses tend to offer more value to tenants and investors alike.

Supply is rising, but demand is still outpacing it in the right locations

Developers delivered approximately 607 million sq ft of new industrial space in the US in 2023, a historic high. But even with that kind of supply, certain markets are seeing space fill quickly,  especially where population growth and infrastructure investment are strong.

Leasing activity and net absorption have stayed positive in key logistics markets. Dallas/Fort Worth recorded over 28 million sq ft net absorption and nearly 52 million sq ft leased in 2023. In Q2 2025, it also registered +6.8 million sq ft absorption, while Atlanta and several other top metros each surpassed 5 million sq ft of leasing. Meanwhile, the Inland Empire, though facing modest vacancy increases, saw +4.8 million sq ft of net absorption in late 2023, signalling ongoing demand in core supply corridors. 

In simple terms, that means demand for logistics real estate is still running strong, especially in high-traffic, high-growth regions. Even with more space becoming available, tenants are still locking in square footage at scale. And for investors, that signals a sector with staying power.

Tenants are signing longer leases, but priorities have shifted

Average lease terms are getting longer, particularly for newly built properties. Occupiers want stability in well-located spaces that are hard to replace. Once they’ve secured the right site, they’re holding onto it.

At the same time, tenant requirements have changed. Ceiling height, power capacity and yard space now lead the way when it comes to the ‘must haves’. Many tenants are also looking for facilities that support automation or can be adapted for returns processing.

The shift has made modern warehouses more resilient. Yes they’re easier to lease, but they’re also more likely to draw financially stable tenants willing to sign longer agreements. Older buildings, even in decent locations, are being left behind unless they can be upgraded. That’s starting to create a clear split in performance across industrial assets.

What it all means for investors

What matters now for investors is where that demand is going and which assets are likely to benefit. Investors are paying closer attention to location, building quality and lease terms, not just national trends.

Income visibility is improving

Longer lease terms and financially reliable tenants are making income from high-quality industrial assets more stable and predictable. Net absorption remains positive in most core logistics markets, even with new supply coming online. That's an important context for investors looking at stability as much as yield.

Vacancy rates need a closer look

Vacancy across the U.S. industrial market rose to about 5.7 % by mid‑2024. But that figure masks a clear divide: older, less functional assets are losing appeal, while modern, high-capability buildings in key areas remain in demand. Quality of construction and tenant strength are now just as important as location.

Development pipelines are thinning

New warehouse construction has slowed. In Q1 2025, completions dropped to just 64.6 million sq ft, the lowest quarterly total since 2018. For the full year, completions are expected to fall by about 50 %, putting annual supply at its lowest point since 2019.

The decline stems largely from higher financing costs, as well as tougher approval hurdles and fewer speculative projects being launched. While this might sound like a negative, fewer new buildings coming online means investors in well-connected markets face less competition, and that gives them more pricing power where demand remains strong.

What investors are watching next

As the market moves out of a period of peak construction and into one shaped by more selective demand, investors are looking closely at signals that suggest where value will hold up, and where risk may rise.

Here’s what’s shaping investor decisions in the next phase of the cycle:

• Lease rollover timelines: Assets with long-term leases in place tend to be favoured, especially where tenant demand is stable and renewals are likely.
• Tenant mix: Single-tenant assets can bring risk if the occupant is highly specialised or exposed to cost-cutting. Diversified tenant profiles in multi-let buildings are drawing more attention.
• Submarket dynamics: Rent growth, vacancy rates and infrastructure investment vary between metro areas and even between submarkets within them.

Institutional investors aren’t pulling out of industrial real estate by any stretch of the imagination, but they have evolved their thinking to be more precise. Instead of chasing headline yields, the focus is shifting to long-term performance indicators. In the current cycle, that often means newer assets, fewer lease expiries and locations with proven demand drivers.

Invest where the demand is real

US warehouses are more than a bet on e-commerce. They’re part of the country’s logistics backbone, and demand for the right kind of space, like modern, flexible, well-located space, isn’t slowing down. Supply is tightening and tenant needs are growing more specialised, meaning investors are acting accordingly.

A chance to invest in the infrastructure behind e-commerce

Industrial real estate in the US is still shaped by the same forces that transformed it over the past decade – online retail, faster delivery and a more complex supply chain. What’s changed is the way investors access it.