Is Industrial Still CRE’s Darling? Tariffs, Reshoring, and the Data Center Boom

Industrial real estate, once the undisputed darling of commercial real estate, is entering a prolonged period of normalization after its pandemic-era boom. Despite rising vacancy rates above 8% and a recent contraction in rent growth—the first since 2020—Emmergard Jaber of Moody's Analytics remains bullish on the sector’s long-term fundamentals. She attributes the slowdown to excess supply, elevated interest rates, and macroeconomic pressures like high oil prices and inflation, which are making expansion decisions more cautious. Yet, the sector still outperforms office, retail, and multifamily in overall resilience. A key shift is the rise of 'build to suit' developments over speculative construction, and a growing trend toward nearshoring—particularly in border markets like Detroit and El Paso—driven by tariffs and supply chain reconfiguration. Meanwhile, data centers have emerged as the new CRE powerhouse, outpacing even industrial in construction and investment, though they remain a distinct asset class due to their specialized infrastructure. The future of industrial lies not in exponential growth, but in strategic positioning around consumer staples, cold storage, and logistics hubs in Sunbelt markets with strong population growth and discretionary spending. The episode reveals a critical pivot: industrial is no longer a runaway winner, but a mature, stable asset class requiring deeper due diligence.