With complex geopolitical and economic currents reshaping world trade, the North American industrial real estate market stands at a critical juncture this year. A gradual shift away from goods manufactured in China since 2020 has diversified the continent’s industrial base through expanded domestic manufacturing and foreign direct investment (FDI), according to Newmark’s 2025 North American Industrial Outlook. Mexico has surpassed China as the United States’ largest trading partner, and higher cross-border trade has fueled demand for inland intermodal logistics across North America.
However, expanding tariffs have increased uncertainty across North American markets in the past four months. These actions could impact industries typically relying on cross-border supply chains, including the automotive industry and some manufacturing sectors. Despite these headwinds, Newmark said North America’s industrial market is positioned for long-term growth.
The industrial sector comprises 21 billion square feet of space in North America, 18 billion of which is in the United States. About 168 million square feet of industrial space was absorbed across the continent last year, and 400 million square feet are in the development pipeline. The U.S. industrial vacancy rate of 6.9% was higher than the average across the continent, with Mexico's rate at 3.5% and Canada's at 3.7% last year.
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Industry observers are watching the North American automobile industry carefully after the U.S. levied a 25% tariff on all imported vehicles. For years, transportation networks among Canada, Mexico and the United States have driven substantial investment in cross-border industrial integration.
To mitigate disruption, some major automakers have adjusted their operations, including idling some plants, shifting production to the United States and are planning investments in nation-based manufacturing projects. For example, Stellantis temporarily suspended production in Canada and Mexico while GM boosted production in Indiana and Hyundai announced plans to invest $21 billion in U.S. onshoring by 2028, including a nearly $6 billion steel plant in Louisiana.
Raw material supply chains, however, lag behind the U.S.'s onshoring momentum. Production disruption timelines are hard to predict but could be potentially severe, said the report.
Meanwhile, conflicts over tariff policies could slow North American industrial real estate demand.
“If tariffs render the U.S. market less economically viable for Canadian and Mexican companies, another geographic recalibration of trade flows becomes increasingly probable,” said the report. “The complex trans-continental rail network may facilitate increased trade and cooperation between Canada and Mexico, bypassing the U.S. and driving industrial demand in rail-served Mexican and Canadian markets.”
The administration’s tariff policies could also reduce U.S. import volumes in the near term, particularly from East Asia. This may weaken industrial demand in West Coast seaport-serving markets in the United States while boosting demand in Mexico and Canada.
Beyond tariffs, tax and energy policies also have the potential to impact industrial demand. The administration has been considering extending corporate tax cuts that expire at the end of this year, which could incentivize increased investment. Changes to energy policy could impact power costs for manufacturers and transportation costs for logistics occupiers.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
