June 25, 2025 | BOMA International, Ella Krygiel
According to JLL’s recently released U.S. Manufacturing Renaissance report, 52% of U.S. manufacturing facilities are between 30 and 60 years old. This aging infrastructure is driving increased demand for modern spaces that can support advanced manufacturing technologies and meet evolving sustainability standards. In this article, three commercial real estate experts weigh in on the current state of U.S. industrial and manufacturing facilities. They explore the impact of aging buildings, as well as external pressures such as tariffs, inflation and rising construction costs. Additionally, they offer insights into how sustainability goals and emerging technologies are shaping the design and demand for next-generation manufacturing spaces. Read on to learn more about the trends reshaping the industrial real estate landscape.
Challenges Facing Modernization of Aging Facilities
“One of the biggest challenges in modernizing aging U.S. industrial and manufacturing facilities is the lack of viable options for small- to mid-sized users—those needing 10,000 to 30,000 square feet,” says Robert Smietana, CEO and President of HSA Commercial Real Estate. “Most newly developed industrial buildings are designed for large-scale operations and don’t accommodate smaller users, leaving them with little choice but to lease outdated facilities with low ceiling heights, shared dock space and cramped layouts that disrupt efficiency.” This perspective is echoed in CBRE’s Impact of Economic Conditions on Commercial Real Estate report, which projects a 5% to 10% decline in industrial leasing volume—particularly among both large (500,000 sq. ft. or more) and small (100,000 sq. ft. or less) users.
Steve Schnur, Chief Operating Officer at CRG, agrees that much of the current vacancy is concentrated in buildings that are “borderline functionally obsolete”—facilities with low clear heights or inefficient layouts that can’t support modern operations. Adding to the complexity, Damon Juha, Partner and Vice Chair of the Real Estate Practice at Saul Ewing, notes that “environmental regulations or significant tax burdens” can further strain owners and developers. As Schnur puts it, upgrading these facilities in a “cost-effective” way remains one of the industry’s most pressing challenges.
Economic Pressures Shaping Industrial Leasing and Development
Tariffs, inflation and rising construction costs are reshaping the industrial real estate landscape. As reported by The Washington Post, tariffs on steel and aluminum have doubled to 50%, introducing higher costs and uncertainty for businesses that rely on metal imports for machinery, construction and manufacturing. Below, our experts break down how these economic pressures are influencing pricing, timelines and demand:
Pricing
Juha notes that tariffs and inflation are driving up material costs and causing supply chain delays. For example, Realtor.com projected that the price of a single box of coil roofing nails could rise from $65 to $325. “Tariffs and inflation clearly can reduce consumer demand, trickling down to demand for industrial facilities,” Juha explains. However, he also sees a potential upside: “Tariffs can drive modernization of older facilities in certain U.S. markets, as the rising cost of overseas operations increases the appeal of domestic alternatives.”
Timelines
Schnur points out that economic uncertainty is causing some developers to delay projects. “Interest rates have some clients pressing pause on new projects where they can, waiting for more certainty,” he says. Still, he remains optimistic, citing strong tenant demand in areas like e-commerce, supply chain reconfiguration and manufacturing reshoring. “Importantly, rent growth is still outpacing inflation, and vacancy remains historically in balance, so well-located developments are still justified.”
Demand
Smietana observes that companies are stockpiling foreign-made parts and raw materials to hedge against rising costs—sometimes securing a year’s worth of inventory. This behavior is fueling short-term demand for warehouse space. He also sees growing interest in reshoring strategies. “We’re seeing real estate decision-makers actively request proposals for U.S.-based operations, particularly in centralized markets with strong infrastructure and available inventory,” he says.
Sustainability and Advanced Technologies Are Shaping Industrial Space Design
“Many occupiers will want high-quality, modern facilities that can support the use of greater automation, driving further productivity,” says Juha. “Advanced technologies will push owners and developers to meet these needs, incentivizing both new developments and reinvestment in older buildings.” One source describes the technologies transforming warehouses and industrial spaces:
Inventory Scanning
RFID (radio-frequency identification) technology enables real-time inventory tracking using electromagnetic waves, enhancing automation and operational efficiency.
Packing Automation
Robotic packing systems streamline the process of opening, filling, and transporting product packaging. Tools like End-of-Arm tooling allow robots to pick items from warehouse racks and place them into appropriate containers.
Data Exchange
Electronic Data Interchange (EDI) automates the exchange of business documents between partners, using rule-based systems for speed and security—including protections against identity theft.
While technology is a major driver of change, sustainability is equally central to the future of industrial real estate. Schnur highlights the company’s commitment to green development: “CRG designs every development with an emphasis on sustainability and state-of-the-art specs. That means features like high-efficiency LED lighting, better insulation, and sometimes solar-ready roofs to reduce energy costs, as well as futureproofing for technology.” Schnur also emphasizes the growing importance of power capacity, as tenants increasingly anticipate the rise of AI, robotics and other data-heavy operations during their lease terms.
Smietana agrees: “Land sites with access to abundant power and water are especially sought after, as they can more easily accommodate manufacturing and other energy-intensive uses, including data centers.” He points to a recent project as an example: “We recently completed Terminus at Hobbs Station near the Indianapolis International Airport—a two-building development featuring higher-end finishes and ample electric power, specifically designed to appeal to manufacturers and tech firms.”
Sustainability and technology are rapidly transforming the design, function and demand for industrial facilities across the U.S. As companies strive to modernize, the challenge lies in identifying strategies that not only enhance operational efficiency but also future-proof these assets. Layered on top of this transformation are economic pressures that continue to shape development and leasing decisions. In a landscape defined by uncertainty, one thing is clear: industrial real estate must keep evolving to stay ahead.
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