While the tariffs environment has hampered deal-making in industrial real estate activity for warehouse and distribution markets, demand for space has remained elevated. That’s according to new research from commercial real estate and property investment firm JLL.

JLL’s 2025 Annual U.S. Industrial Tenant Demand Study found that overall real estate activity among U.S. warehousing and distribution tenants fell 10.9% year-over-year as occupiers are taking longer to make decisions in the face of trade uncertainties and rising costs. However, while demand among traditional retailers has decreased by 16.7%, demand among 3PL, logistics and distribution users increased by over 12.8%, driven by tariffs and inventory frontloading by Asian 3PLs.

According to the study — which drew from market intelligence across more than 60 U.S. markets — immediate tariff effects have resulted in a pause of deals and delayed decision-making among occupiers. The timeframe required for occupier decision-making is now averaging 11 months, up from 3.5 months experienced during the pandemic.

Manufacturing continues to gain momentum. According to the study, companies are increasingly driven to reduce risk for essential products and locate production closer to consumers. This year’s analysis found manufacturing now represents over 19% of total demand. By 2028, manufacturing-related demand is projected to reach 30%.

The study also found that build-to-suit inquiries are up 117% since 2018, with growing interest in land acquisition across the sector. Researchers believe this shift suggests firms are seeking asset ownership and long-term cost control.

A regional analysis finds the Southeast region dominating with 24.1% of total national demand. According to the report, Atlanta and Savannah lead this powerful regional corridor, together accounting for 43% of the Southeast’s activity. Meanwhile, 3PL, logistics and distribution providers command 16.8% of demand, making the region the U.S.’s distribution backbone.

Despite current market hesitations, JLL’s analysis also points to accumulated industrial demand that remains sidelined but ready to enter the market.

“There’s significant pent-up demand in the market. This stems from companies actively seeking modern facilities to replace aging assets while simultaneously planning consolidation strategies,” said Craig Meyer, president of Industrial Brokerage at JLL. “The decision cycles now extend to 12-14 months as executives hesitate to make substantial investments in today’s uncertain economic climate, especially given the limited supply of suitable properties. Once market conditions stabilize, we expect this accumulated demand to translate into substantial activity.”

Download the full report here.