CHICAGO — The explosive growth of e-commerce has ignited an intense competition for prime warehouse and distribution space, as retailers scramble to meet consumers' escalating expectations for rapid delivery, according to a new report from global real estate firm JLL.
The study reveals how online shopping has fundamentally transformed supply chain operations, accelerating automation, shortening cycle times, and increasing order fulfillment efficiency — all while creating unprecedented demand for industrial real estate.
Soaring Rents, Limited Supply
JLL's market data shows warehouse rents continuing their upward trajectory as companies vie for distribution centers. Currently, 60 JLL tenants are searching for facilities exceeding 1 million square feet, while available space remains scarce with a supply-demand ratio approaching 1:3.
Unlike previous boom cycles, developers remain cautious about speculative construction, with limited investment expected in distribution centers over the coming year. This constrained supply is intensifying competition and driving rents higher.
Tech-Driven Warehousing Revolution
Advanced technologies are enabling the development of hyper-efficient, large-scale fulfillment centers. Location strategies have become increasingly data-driven as companies seek optimal sites to meet tight delivery windows.
"Automation, robotics, and analytics help businesses boost efficiency while meeting consumer demands for speed," Meyer explained. "We're seeing massive investments in technologically advanced facilities capable of processing enormous order volumes with lightning-fast turnaround."
JLL projects approximately 158 million square feet of new U.S. distribution space will come online this year — the highest level in seven years, yet still below the 40-year average of 165 million square feet. Notably, about half of current construction activity concentrates in just six major logistics markets, leaving secondary markets with constrained supply.
Secondary Markets Gain Momentum
Growing demand is now spreading to markets like Indianapolis, Phoenix, and Seattle, where companies often seek smaller 500,000-square-foot facilities rather than massive distribution hubs.
"We'll continue seeing high-efficiency warehouses deployed in secondary markets," Meyer noted. "This expansion reflects both shifting distribution models and consumers' expectation for 48-hour delivery — sometimes even same-day."
The geographic diversification mirrors e-commerce companies' nationwide expansion as they build networks to serve customers across all regions.
New Retail Models Reshape Demand
Emerging trends like online grocery services (e.g., Amazon Fresh) and omnichannel distribution — where customers can choose between home delivery, in-store pickup, or locker collection — are further transforming warehouse requirements.
Industrial real estate has recorded 19 consecutive quarters of positive absorption, with vacancy rates dipping below 7% — a ten-year low, according to JLL data.
The "Perfected" Supply Chain
Meyer identifies supply chain optimization as the driving force behind warehouse demand growth, calling the fusion of technology and efficiency this cycle's defining characteristic.
"Retailers now approach supply chains as scientific processes," he explained. "Advanced tracking provides complete visibility from raw materials to final delivery. When consumers scan RFID codes, that data instantly traces a product's entire journey."
This end-to-end transparency enables better inventory management, optimized shipping routes, and improved order accuracy.
Future Outlook: Leaner, Smarter Warehouses
As e-commerce growth continues, warehouses will evolve toward leaner operations, smarter technology integration, and strategic location planning.
"Demand remains robust while new construction stays measured," Meyer observed. "Annual industrial development averaged 163 million square feet in previous cycles but dropped to 122 million recently. The market is tightening significantly."
The next generation of facilities will emphasize waste reduction through process optimization, automation implementation, and predictive analytics while prioritizing locations near population centers and transportation hubs to minimize delivery times and costs.