The Turn

After a two-year construction slump, U.S. warehouse development is accelerating again. More than 305 million square feet of industrial real estate was under construction nationwide in the second quarter of 2026, up 18% year-over-year and marking the second consecutive quarter of annual growth, according to Cushman & Wakefield.

Q2 leasing volume was the strongest since mid-2022, giving developers the confidence to break ground on new projects. Prologis plans $4.5 to $5.5 billion in development starts this year, up from $3.1 billion in 2025. Panattoni, based in Irvine, is ramping up starts by 62% over last year.

But the pipeline remains well below the pandemic-era peak of 725 million square feet under construction in Q3 2022. As Doug Roberts, Panattoni’s president of North American development, put it: “We’re still cautiously optimistic, but nowhere near what it was three, four years ago.”

What’s Driving the Comeback

The demand picture has shifted from the pandemic’s e-commerce surge to a more diversified set of drivers:

  • Data centers and AI infrastructure – Prologis expects 40% of its 2026 development starts to be data centers, responding to the rapid build-out of AI computing capacity nationwide.
  • Tariff-driven inventory stocking – Retailers are leasing space to warehouse goods ahead of potential tariff changes, pulling demand forward.
  • Manufacturing reshoring – Companies bringing operations into the U.S. need industrial space, supporting a structural rather than cyclical demand layer.
  • Third-party logistics growth – 3PLs are expanding to meet outsourced fulfillment needs.
  • Supply-chain diversification – As Henry Steinberg of EQT Real Estate noted, tenants are seeking to mitigate risk from port backlogs, tariffs, and natural disasters by creating more diversity in their supply chains.

What This Means for the South Bay

The national trend has specific implications for the Carson, Wilmington, and Torrance industrial corridor that we track daily:

Port-proximate markets are the first to feel the shift. The same tariff concerns driving national leasing demand are amplified here, where tenants depend on POLB and POLA throughput. We are already seeing tenants who paused renewals in 2024 and 2025 returning to the market, often with shorter decision cycles.

New construction in this market remains constrained. The South Bay lacks the large developable parcels available in Inland Empire or the Houston market. What gets built here is infill and redevelopment, not greenfield. That means existing space commands a premium when demand accelerates, and it means tenants who locked in rates in 2023 and 2024 are sitting on increasingly favorable lease positions.

Data-center demand is not a primary driver locally – yet. The South Bay’s industrial stock is weighted toward logistics, transload, and container freight operations. But the secondary effect is real: as data-center operators absorb space in Inland Empire and the High Desert, traditional logistics users get pushed toward port-proximate submarkets like ours.

The Risk Side

The development rebound is not without headwinds. The Federal Reserve has signaled potential rate hikes if inflation persists. Consumer sentiment remains near record lows. And companies pulling holiday merchandise forward to get ahead of tariff costs and Iran war-related disruptions are expected to reduce imports later in the year, which could soften near-term port-adjacent demand.

Jeremy Garner of Trammell Crow noted that coastal markets where construction had slowed are “seeing green shoots now and reasons to move forward with more development.” The question for our market is whether those green shoots translate into speculative starts or remain driven by pre-leased demand.

Bottom Line

The industrial market is turning a corner, but it is a measured turn, not a return to 2022. For South Bay tenants, the window to secure favorable lease terms is narrowing. For landlords, the pressure to fill vacant space is easing, but concessions remain available for creditworthy tenants willing to commit to longer terms.

Source: Liz Young, “Developers Are Back to Building U.S. Warehouses,” Wall Street Journal Logistics Report, July 15, 2026.

Vesperlight Real Estate Services tracks South Bay industrial market conditions daily through AIR CRE data, port statistics, and direct broker relationships. Contact us for current market intelligence specific to your submarket.