However, expanding tariffs have increased uncertainty across North American markets in the past four months. These actions could impact industries typically relying on cross-border supply chains, including the automotive industry and some manufacturing sectors. Despite these headwinds, Northmarq said North America’s industrial market is positioned for long-term growth.
The industrial sector comprises 21 billion square feet of space in North America, 18 billion of which is in the United States. About 168 million square feet of industrial space was absorbed across the continent last year, and 400 million square feet are in the development pipeline. U.S. industrial vacancy of 6.9% was higher than the average across the continent, with Mexico posting a vacancy of 3.5% and Canada posting a vacancy of 3.7% last year.
Industry observers are watching the North American automobile industry carefully after the U.S. levied a 25% tariff on all imported vehicles. For years, transportation networks among Canada, Mexico and the United States have driven substantial investment in cross-border industrial integration.
To mitigate disruption, some major automakers have adjusted their operations, including idling some plants, shifting production to the United States and planning investments in the U.S.-based manufacturing projects. For example, Stelantis temporarily suspended production in Canada and Mexico while GM boosted production in Indiana and Hyundai announced plans to invest $21 billion in U.S. onshoring by 2028, including a nearly $6 billion steel plant in Louisiana.
Raw material supply chains, however, lag behind U.S. onshoring momentum. Production disruption timelines are hard to predict but could be potentially severe, said the report.
Meanwhile, conflicts over tariff policies could slow North American industrial real estate demand.
“If tariffs render the U.S. market less economically viable for Canadian and Mexican companies, another geographic recalibration of trade flows becomes increasingly probable,” said the report. “The complex trans-continental rail network may facilitate increased trade and cooperation between Canada and Mexico, bypassing the U.S. and driving industrial demand in rail-served Mexican and Canadian markets.”
The administration’s tariff policies could also reduce U.S. import volumes in the near term, particularly from East Asia. This may weaken industrial demand in West Coast seaport-serving markets in the United States while boosting demand in Mexico and Canada.
Beyond tariffs, tax and energy policies also have the potential to impact industrial demand. The administration has been considering extending corporate tax cuts that expire at the end of this year, which could incentivize increased investment. Changes to energy policy could impact power costs for manufacturers and transportation costs for logistics occupiers.
