Interest in bonded warehouses is on the rise as tariff uncertainty continues to ripple through the supply chain, according to Yardi Matrix’s May national industrial report. Such facilities allow imported goods to be stored without paying taxes until they are released.
There also appears to be interest in converting existing warehouse space into bonded warehouses, a time-consuming and costly process that could be worth the effort if tariff rates ease in the future and goods can be released at a lower rate. If duties remain high, bonded warehouses also provide a way to gradually release inventory and better manage tariff-related cost pressures, said the report.
“In the long run, firms may look to move production of goods that are bound for America out of China and into lower-tariff nations like Vietnam, India and Mexico,” said the report. “Some may choose to reshore production in the U.S., but a 50% tariff on steel and aluminum imports could hamstring manufacturer plans to develop facilities stateside.”
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Import volume fell by nearly 20% in April as firms pulled back following a first-quarter rush to ramp up inventories before the Trump Administration announced new tariffs. Port volume has dropped in markets like Los Angeles, but another wave of imports is underway as firms rush to get ahead of future tariffs and build inventory ahead of the holiday season.
Vacancy was down and rents were up for industrial space across the country in May, according to Yardi Matrix. National in-place rents for industrial space increased 6.3% year-over-year to $8.54 per square foot, and vacancy dropped 30 basis points month-over-month to 8.5%, Yardi Matrix said. However, that was up 290 bps year-over-year. Miami led the nation in rent growth for May, with in-place rents increasing 9.8% over the past year.
As of May, 342.3 million square feet of industrial space was under construction nationwide and 117.8 million square feet had been delivered. In all, 86.9 million square feet of starts were recorded through May, which puts 2024 on pace for the lowest amount of industrial starts this decade.
“While we have long anticipated starts will pick back up sometime in 2026, recent events threaten to upend this outlook,” said Yardi Matrix. “Uncertainty around tariffs has delayed leasing decisions for many occupiers, slowing the rate at which recently delivered new supply is being absorbed.”
The industrial sector also has faced uncertainty due to fewer-than-expected interest rate cuts that have kept costs for construction loans elevated and put downward pressure on starts, said the report. However, the most significant threat to a rebound in industrial starts is the 50% tariff on imported steel, said the report.
Industrial transactions totaled $21.4 billion during the first five months of the year, with properties trading at an average of $133 per foot, according to the report. Phoenix has been a top target for investors thanks to its growing status as a logistics and manufacturing hub. The market logged $862 million in sales this year, with sales prices averaging $187 per foot.
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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.
