The U.S. industrial real estate sector – particularly in the manufacturing subsector – has undergone one of the most dynamic and transformative periods in modern history. The pandemic triggered massive disruptions across global supply chains, exposed critical vulnerabilities in offshore-dependent production networks, and ultimately reshaped the way manufacturers, distributors, and logistics operators think about resiliency and capacity. Today, the sector is entering a new phase – characterized by normalization in some areas, renewed growth in others, and increasing structural demand driven by on-shoring, automation, and supply-chain reconfiguration.
At Tempo Investments, we’ve been closely tracking how these forces are reshaping both risk and opportunity in industrial real estate. Below is a clear, investor-focused view of where the market stands, what’s driving demand, and why manufacturing-centric industrial assets remain a compelling allocation as we move deeper into the next cycle.
Post-Pandemic Performance: A Sector That Outperformed
From 2020 through 2022, industrial real estate was the standout performer across all major commercial property types. A combination of accelerated e-commerce adoption, urgent inventory rebuilding, and corporate initiatives to diversify supply sources led to record leasing activity and rent growth. National vacancy rates hit historic lows, and modern Class-A industrial product often leased before completion.
But the story didn’t end there.
As the Federal Reserve began raising interest rates in 2022–2023, transaction volumes slowed and some markets saw vacancy tick upward, largely in older, less functional facilities. New supply delivered during the boom also softened short-term absorption in certain regions. Even so, industrial remained far more resilient than office or traditional retail, with rent growth continuing—just at a more normalized pace.
By early 2025, the market began to show renewed strength. Modern, highly functional industrial and manufacturing-capable spaces are again capturing robust tenant demand, while older commodity inventory faces more modest leasing velocity. This bifurcation reflects a maturing asset class where specifications—power availability, clear heights, loading efficiency, and labor access—define long-term performance.
Manufacturing’s Resurgence: The New Demand Driver
While logistics demand has been the dominant narrative for a decade, manufacturing is re-emerging as a powerful force in industrial real estate.
On-shoring and near-shoring are no longer talking points—they’re capital programs.
Industries such as electronics, automotive components, energy technologies, pharmaceuticals, and advanced manufacturing are expanding domestic footprints to reduce dependence on geographically concentrated suppliers. Federal incentives, geopolitical risk concerns, and a desire for supply-chain redundancy have accelerated this trend.
Manufacturers are increasingly seeking:
- Facilities with heavy power and utility capacity
- Buildings suitable for automation and robotics
- Locations with deep labor pools and access to intermodal transportation
- Proximity to suppliers and end-distribution hubs
This shift creates durable demand for specialized manufacturing-ready real estate—not just bulk distribution centers.
Key Forces Shaping the 2024–2025 Manufacturing Landscape
1. Tariffs and Trade Policy
New and expanded tariffs on strategic goods—including steel, aluminum, electric vehicles, batteries, and renewables components—are reshaping the cost structure for U.S. producers. While these tariffs raise input costs for some industries, they also push corporations to reevaluate the risk premium of offshore manufacturing. The net result has been a meaningful uptick in domestic production commitments, benefiting industrial markets in the Midwest, Southeast, and Mountain West.
2. Labor and Staffing Costs
Manufacturers face one of the tightest labor markets in decades, with rising wages and persistent skill shortages. This trend accelerates investment in automation, robotics, and advanced production processes—requiring higher-quality real estate with adequate infrastructure and design flexibility.
3. Commodity and Construction Costs
Elevated pricing for steel and specialized building materials has increased replacement costs. Ironically, this supports valuation for existing, well-located assets, as new development becomes more expensive and sometimes less feasible.
4. Transportation and Distribution Costs
The volatility of global freight markets during and after the pandemic prompted many companies to restructure logistics networks. Even as transportation costs normalize, the desire for regionalized, multi-node distribution systems remains strong. This supports demand for manufacturing-adjacent facilities that shorten transit times and provide greater operational control.
Investor Sentiment and Capital Flows
Institutional capital poured into industrial during 2020–2022, and while rising interest rates moderated transaction volumes in 2023–2024, investor appetite remains significant—particularly for manufacturing-capable assets. Private equity, pension funds, sovereign wealth funds, and global investors continue to view industrial as a long-term core holding.
However, underwriting is more disciplined today:
- Investors are favoring modern Class-A space with functional relevance over generic commodity product.
- Capital is shifting toward regional manufacturing corridors, particularly those benefiting from government incentives and labor availability.
- Many institutions expect industrial demand to accelerate again once interest-rate clarity improves.
Compared to other asset classes, industrial remains one of the most structurally supported sectors, with a clearer forward demand story than office or retail and more diverse tenant fundamentals than multifamily.
The Outlook: A Strong Structural Runway
Over the next 3–5 years, manufacturing-oriented industrial real estate is positioned for sustained growth. While macroeconomic headwinds—interest rates, geopolitical uncertainty, and recession risk—may create short-term fluctuations, the foundational drivers of demand are structural:
- Supply-chain resiliency
- Domestic production investment
- Automation-driven facility requirements
- Near-shoring of critical industries
- Higher replacement costs limiting oversupply
Modern industrial and manufacturing assets that support these long-term needs will, in our view, continue to outperform.
How Tempo Investments Is Positioning
At Tempo Investments, we are targeting high-quality, strategically located industrial assets that benefit from on-shoring, advanced manufacturing growth, and long-term supply-chain evolution. Our focus is on markets with strong labor pipelines, logistics connectivity, and increasing capital commitments from manufacturers.
If you are interested in learning how we’re sourcing opportunities aligned with these themes—or exploring current offerings within our industrial portfolio—we would welcome a conversation.
