It’s safe to say at this point that the tariffs imposed by the new U.S. administration on China, Mexico, Canada and others have injected further uncertainty into the U.S. industrial sector. Specifically, short-term effects are likely to include delays in leasing decisions, higher construction costs and supply chain disruptions. That’s according to the latest CommercialEdge industrial report, which also notes that these three nations collectively account for more than two-fifths of U.S. imports.

Even before the tariff announcements, anticipation alone saw port activity spike in January: The country’s 10 busiest ports logged an 18% year-over-year (Y-o-Y) increase as companies scrambled to stockpile goods ahead of the expected tariffs.

Looking ahead, the industrial construction picture is complicated. While onshoring of manufacturing has been a major driver of industrial construction in recent years (and on a large scale), rising costs — especially for steel and aluminum — could, at least for now, dampen enthusiasm for reshoring efforts. Although reports since the tariff announcement suggest that some projects might be canceled or postponed, others are pushing forward. Accordingly, the new administration has stressed that the ultimate onshoring goal will take time — potentially up to two years — which it has admitted may cause some short-term pain, at the least for some projects.

February Industrial Market Stats: Houston Construction Jumps 44% Y-o-Y

Digging into the numbers from the CommercialEdge report, the U.S. industrial active pipeline stood at 344.9 million square feet in February, just 1.7% of existing stock. Last year, construction starts dropped sharply due to broader economic factors — a trend likely to persist in 2025.

Leading with the largest active pipeline is Dallas, which tops the list with 23.7 million square feet underway. It’s followed by Phoenix at 16.1 million and Houston at 13.8 million. Notably, Dallas and Phoenix have held the top spots for a while, but Houston’s pipeline has increased 44% Y-o-Y. In fact, since the Panama Canal expansion last decade, the Port of Houston has become the fifth-busiest in the nation for containers, as well as the largest by total tonnage, and the busiest along the Gulf Coast, thereby feeding demand for warehouse and distribution space.

On the rent front, the national average for industrial space hit $8.43 per square foot in February — up 7.1% Y-o-Y. At the same time, growth slowed in former hotspots like southern California’s Inland Empire (up 8.9% to $11.06 per square foot) and Los Angeles (up 7.7% to $15.09 per square foot). For context, last February, Inland Empire logged 12.9% growth and Los Angeles hit 12.1%. Still, Los Angeles remains among the top three markets — all in California — for in-place rents. More precisely, Orange County led at $16.83 per square foot, followed by Los Angeles, then the Bay Area ($13.66). At the other end of the spectrum, Memphis, Tenn., is the most affordable at $4.12 per square foot, followed by St. Louis ($4.93) and Kansas City, Mo. ($4.96).

Meanwhile, the gap between new leases ($10.56 per square foot) and in-place rents narrowed to $2.13 nationally as tenants capitalize on rising vacancies. However, CommercialEdge expects this gap to shrink further as new supply — mostly premium, high-tech facilities — is likely to command higher rates. The biggest spread between new leases and the current market average was in Bridgeport, Conn., with a $5.18 per square foot difference. Other markets with high new-lease premiums included Miami ($4.92), Boston ($4.09), Seattle ($3.92) and New Jersey ($3.84). In contrast, Kansas City, Mo., had the smallest spread, with just an eight-cent difference.

Finally, industrial transactions hit $6.1 billion year-to-date with an average price of $127 per square foot — up 5% since 2022. Dallas-Fort Worth led sales volume at $415 million, followed by New Jersey ($351 million) and Los Angeles ($233 million). The latter’s tally stands out given that the total is nearly triple the $80 million recorded 12 months ago. Lastly, Orange County remains the priciest market at $340 per square foot.

For more analysis across all major industrial markets in the U.S., see CommercialEdge’s original report.