Industrial Rebound Fuels New Wave Of Speculative Projects

What were recently big, empty warehouses have once again become hot commodities, creating a development push to meet the demand.

A wave of large-block requirements, rising logistics demand and fresh federal incentives for domestic manufacturing are collectively tightening vacancy and emboldening lenders, pushing speculative projects back into the pipeline.

“There’s going to be a huge competitive rush to start to try to satisfy those big requirements because that’s a very easy exit for development,” said Peter Kroner, who leads industrial research for Avison Young. “If you can get a long-term lease signed in a million-square-footer, there’s a lot of capital that would love that type of exposure.” 

Prologis broke ground on more new developments in the first half of the year than it did across all of 2025, and the globe’s largest industrial landlord doesn’t plan on stopping.

Executives said the company could as much as double its development pipeline by year-end as it chases demand, logging 67M SF worth of leases in the second quarter, the company disclosed Thursday.

The quarterly results from Prologis reflect growing demand for new space in the industrial sector. Resurgent tenant demand is chipping away at the glut of space born from a wave of pandemic-era construction and fueling the next wave of capital.

U.S. industrial space under construction grew by 10% year-over-year to 312M SF, with development starts increasing in each of the last three quarters, including a wave of speculative facilities larger than 200K SF, according to Colliers. Prologis broke ground on 5.7M SF in the second quarter, 75% of which is build-to-suit.

Three Texas metros — Dallas-Fort Worth, Houston and Austin — are among the top five cities with new space under construction, rounded out by Phoenix and Atlanta. The markets collectively have 108M SF under construction, roughly one-third of the entire development pipeline. 

Prologis is planning to as much as double its construction starts by the end of the year, with $3.1B started year-to-date and plans to end the year with a total between $5B and $6.5B, including its data center operations, Prologis Chief Financial Officer Tim Arndt said on the firm’s earnings call.

“When you see the improving market fundamentals across so many of our markets — we’re talking over two dozen markets that we could see spec this year, where the rents have caught up,” he said.

U.S. leasing activity was up 12% in the second quarter compared to the prior year, and the 318M SF worth of deals signed in the first half of the year is 20% higher than the same period in 2025, according to Cushman & Wakefield.

Net absorption, the difference between move-ins and move-outs, hit 114M SF in the first half of the year, the sector’s strongest showing since 2023. 

As demand, especially for large blocks of space, picks up, developers and lenders are getting more comfortable breaking ground. Some of the first spec buildings to go up are the later phases of pandemic-era projects that pressed pause after getting the first facility out of the ground, said Lisa Pittman, executive managing director for logistics and industrial at Cushman & Wakefield.

“Groups that have a Phase 2 that can accommodate another million-square-foot building will go on it as soon as they lease the first million square feet, if they have that standing,” she said. 

Prologis rode the wave of second-quarter activity to beat analyst expectations, reporting an 85% year-over-year jump in net earnings per share on $2.4B in total revenue.  

The industrial giant started $1.6B worth of new development during the quarter, split roughly evenly between its logistics and data center business, completed $1.8B in third-party acquisitions, and closed on $3.4B of debt as part of its co-investment ventures.  

Prologis beat analyst forecasts in its second-quarter results reported Thursday.

U.S. industrial market leasing dynamics are generally tilting back toward landlords, as large swaths of the 1.5B SF of industrial space that was available at the end of the year is steadily leased in part by the return of large-block tenants. 

Occupiers are inking deals despite the volatile economic and geopolitical landscape. While tariffs and trade fights weighed on demand early in President Donald Trump’s second term, industrial executives are no longer willing to wait for a clearer picture, even as the U.S. war with Iran keeps the Strait of Hormuz blocked, choking off a key shipping lane. 

“The biggest change from six to 12 months ago is that we have clarity in the market. With leasing going up, there’s a growing consensus that we have found our footing, and this and the growth in construction is reflecting developer confidence in the market,” said Mark Russo, the head of industrial research at Savills.

“It’s still a highly uncertain world, but we have more certainty on industrial fundamentals right now,” he added. 

The One Big Beautiful Bill Act, Trump’s signature tax and policy package that became law last July, helped inject some certainty into developers’ calculus while also providing a buffet of incentives meant to bring manufacturing back to the U.S. The mix of tariffs on imports and incentives on domestic manufacturing have been enough to bring some production into the country, Kroner said. 

Together with the explosive demand for data center development, the rising investment in advanced manufacturing is broadening an ecosystem of industrial occupiers that provide support services to the hyperscalers, chip fabricators and weapons manufacturers that are expanding production.

Site selection searches, land acquisitions and permitting activity ticked up immediately after the passage of Trump’s policy package, and the projects that can come up with a workable debt structure in this interest rate environment are now starting to break ground, Kroner said. He expects developers will lean into the new incentives from a friendly federal government and continue breaking ground on new projects. 

“Everybody kind of understands the environment for the next two and a half to three years, and so we fully expect this to go hockey stick, just like it did under Biden,” he said, referring to development and the previous administration’s passage of the CHIPS and Science Act and the Infrastructure Investment and Jobs Act. 

Construction volume is currently at a 12-year low, with 44M SF of completions in the second quarter, according to James Breeze, CBRE’s head of industrial research. With the recent spate of development breaking a relative lull in new starts, Breeze expects the pace of construction in the near term will largely depend on the performance of the early movers who have already broken ground. 

“Developers are going to watch the product that’s getting built right now and see the level of demand,” he said. “If it continues, then they will feel more confident breaking ground. But there’s going to be a lot of watching how this first wave performs.”