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Industrial & Logistics REITs

How warehouse and logistics REITs profit from e-commerce and supply chains, and why new supply can catch up with demand fast

What industrial REITs own

Industrial REITs own warehouses, distribution centers, fulfillment centers, and light manufacturing or "flex" space, typically located near ports, highways, rail lines, and major population centers to support efficient movement of goods. Building specifications matter a great deal to tenants: clear ceiling height, the number of loading dock doors, trailer parking, and proximity to major highway interchanges all affect how efficiently a tenant can operate out of a given building. Many industrial REITs also develop build-to-suit facilities constructed to a specific tenant's requirements, in addition to buying and leasing existing buildings. Prologis is by far the largest company in this sector; other well-known industrial REITs include First Industrial Realty Trust, Rexford Industrial Realty, and EastGroup Properties.

How they make money

Industrial REITs lease large buildings to logistics companies, retailers, manufacturers, and e-commerce businesses, typically on leases running several years. Compared with office or retail space, industrial buildings are relatively simple — often just a large enclosed shell with loading docks and clear ceiling height — which means lower ongoing capital costs per square foot to build out and maintain than in sectors that require extensive tenant-specific finishes. Some industrial buildings are leased to a single tenant occupying the entire structure, while others are subdivided among several smaller tenants; multi-tenant buildings generally require more active leasing management but can reduce the impact of any one tenant leaving. Releasing costs when a tenant does vacate are typically much lower than in office, since most industrial space needs little tenant-specific build-out to be ready for the next occupant.

What drives demand

E-commerce growth has been a major driver of industrial demand over the past decade, since fulfilling online orders generally requires meaningfully more warehouse space per dollar of sales than traditional store-based retail distribution. Broader trade volumes, manufacturing activity, and companies' decisions about how much inventory to hold close to their customers — sometimes described as building supply-chain buffer or resilience — also move demand for industrial space, particularly in markets near major ports and population centers. In recent years, some companies have also relocated portions of manufacturing closer to the U.S. market, a trend often described as onshoring or reshoring, which has added a further, though smaller, source of industrial demand alongside e-commerce and traditional distribution needs. Population growth in fast-growing regions also supports local distribution facilities built to serve nearby residents quickly.

Key risks

Industrial buildings are relatively fast and inexpensive to construct compared with most other commercial property types, so hot markets can attract waves of new development that outpace tenant demand and pressure rents. The sector is also tied to the broader economic cycle through trade and manufacturing activity, and any single large building often depends on one or a few tenants, creating concentration risk at the property level even within an otherwise diversified portfolio. Because industrial REITs often carry active development pipelines, they're also exposed to construction cost inflation and to interest rates, which affect both the cost of funding new projects and the value the market places on completed, income-producing buildings.

Metrics that matter

Occupancy and leasing spreads show how much rent growth a REIT is capturing as leases roll to market, while same-store net operating income growth measures organic performance. Industrial REITs also frequently disclose the estimated gap between in-place rents on existing leases and current market rents — a wide gap suggests embedded future rent growth as older leases expire and reset. For REITs actively developing new buildings rather than only acquiring existing ones, the expected yield on a completed development project, compared with the cap rate at which a similar finished building could be bought or sold, is an important measure of whether development is creating additional value. Cap rates are also closely watched here given how actively the sector trades on acquisitions and dispositions.

Sub-types within industrial

The sector spans several distinct property types: large bulk or "big-box" distribution centers built for regional or national distribution, smaller last-mile urban infill warehouses positioned for fast local delivery, light manufacturing and flex space that combines office and warehouse use, and cold storage facilities built for food and pharmaceutical distribution. Geographic diversification across multiple metro areas and port markets can also reduce a portfolio's exposure to any single region's construction cycle or trade patterns. Current industrial REITs, including Prologis, are listed on the industrial sector page; the glossary and the sectors overview cover related terms and the rest of the series.

See it in the data: Industrial REITs → Prologis profile →

Research and education only — nothing here is investment advice. Figures such as the 90% distribution rule are general and can change; always confirm against a company's filings.