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The Outlook for Industrial
The industrial real estate sector continues to stand out as a resilient and adaptive asset class, even amid economic uncertainty and shifting global dynamics. As we move through 2025, several dominant trends are shaping the trajectory of the market—from a fundamental shift in global supply chains to rising sustainability expectations, technological advancements and recalibration of capital strategies. Here’s a look at what’s driving the market: Onshoring and Supply Chain Reconfiguration The reshoring of manufacturing and logistics operations is no longer a speculative trend—it’s a structural shift. Spurred by pandemic-era supply chain disruptions and ongoing tariff concerns, companies are doubling down on operational resilience. This has led to a surge in demand for modern industrial space in inland and secondary markets, particularly near major highway corridors and intermodal hubs. This shift is putting pressure on developers to deliver new inventory quickly, even as construction costs and permitting timelines remain elevated. In particular, industrial locations in non-coastal metros are seeing increased activity as firms diversify away from traditional port-adjacent markets. Demand for Sustainable Real Estate Sustainability is no longer a “nice to have”—it’s a core tenant demand. Industrial occupiers are increasingly seeking energy-efficient, environmentally responsible facilities that align with their business goals and lower operational costs. This includes buildings equipped with solar-ready rooftops, LED lighting, EV charging infrastructure and LEED certifications. The push for greener buildings is also being driven by investors, who are factoring sustainability into underwriting and long-term asset value. Sustainable assets typically observe higher value in the market and are likely to lease up faster. Advancements in Technology From AI-enabled automation to smart building systems and robotics, technology is revolutionizing industrial and warehouse properties. In fact, more than a quarter of U.S. warehouse inventory is expected to be automated by 2027. Industrial occupiers leverage automation to create a more efficient process for moving products through their facilities, speeding up order fulfillment and improving inventory management. Properties equipped with automation and robust digital infrastructure are also typically viewed as “future proof,” making them more attractive to investors over the long term. Capital Markets and the Rise of Sale-Leasebacks Tariff concerns, economic volatility and tightened liquidity are prompting many corporate occupiers to turn toward alternative sources of capital, such as sale-leasebacks. This trend is especially pronounced in the industrial sector due to the strong investment profiles of these assets. The primary benefit of a sale-leaseback is the ability to immediately convert an illiquid real estate asset into liquid capital to meet both short- and long-term needs. Sale-leasebacks can also help boost a company’s balance sheet by putting them in a better cash position and improving their debt-to-equity ratio, enabling them to secure more attractive debt financing in the future should they need it. The Future is Bright Despite short-term headwinds such as tariffs and macroeconomic uncertainty, the industrial real estate market in 2025 is defined by transformation and opportunity. Onshoring is redrawing the logistics map, sustainability is reshaping development, technology is boosting efficiency and output, and capital markets are evolving to meet new financial realities. For stakeholders across the supply chain—from developers and investors to tenants and brokers—understanding these trends, and opportunities, is essential for navigating the road ahead.
Tenant Partnerships – The Road to a Sustainable Future
As Climate Week NYC approaches, the spotlight on sustainability is brighter than ever. For companies across industries, the annual event underscores the urgent need to address climate change. The real estate sector, estimated to be responsible for nearly 40% of global carbon emissions, plays a critical role in advancing this worldwide effort. At W. P. Carey, we recognize our potential to drive meaningful impact in the fight against climate change through our extensive portfolio of over 1,200 net lease properties. While the net lease model means our tenants have full operational control of their properties, we are committed to collaborating with them to achieve shared sustainability goals and enhance the quality of our properties. Here’s how: Gaining insights through data Collecting detailed energy data remains a core focus for us. Collaborating with our tenants to install IoT smart meter systems provides both us and our tenants access to high-quality utility data for their leased properties. This data can be utilized to assess energy usage for regulatory compliance as well as voluntary reporting. It also enables us to calculate the carbon footprint of our portfolio and identify opportunities to implement energy-saving measures at our properties. In 2023, we began a smart meter installation program with our European tenants, making the process more efficient for both W. P. Carey and our tenants while also reducing the risk of data errors. Renewable energy opportunities Renewable energy can reduce building operating costs and lower carbon emissions. One of the most accessible sources of renewable energy is solar power, which can be harnessed through the installation of solar panels. Particularly given the roof space that our industrial and warehouse assets provide, we believe we have a large addressable market for solar. Through W. P. Carey’s CareySolar® program, tenants have the opportunity to take advantage of rooftop and carport solar installations at their leased properties through a broad array of structures. These include: Landlord-operated Landlord-financed Tenant projects Rooftop leases W. P. Carey collaborates with each tenant to understand their current energy usage and determine the ideal solar solution for their unique property. In 2023, W. P. Carey extended the lease term with an existing tenant for their 265,000-square-foot industrial facility in Illinois. Simultaneously, we signed a 15-year power purchase agreement where we plan to build a 1,350-kilowatt roof mounted solar system that would offset 740 metric tons of CO2 annually. We will manage and fund the construction of the system and sell the power generated by the system to the tenant. Building energy retrofits Implementing sustainable features to improve energy efficiency has a huge impact on a property’s life-cycle emissions. W. P. Carey can do this through property-specific energy retrofits. An example of an energy retrofit is the installation of LED lighting. LED lights are 80% to 90% more energy efficient than other light bulbs and do not contain any environmentally hazardous materials. Additionally, LEDs last up to 25 times longer than traditional incandescent bulbs. In 2023, W. P. Carey completed a full LED retrofit at our 1.5 million-square-foot warehouse in University Park, Illinois. The LED project is expected to result in a 35% reduction in lighting electricity usage and 41% reduction in utility and maintenance bills at the property. Following the completion of the retrofit, we leased the property to Samsung for a term of 10.5 years. Green-building certifications Green-building certifications such as LEED and BREEAM can provide many benefits for both landlords and tenants. Achieving a green-building certification means that a property meets certain sustainability requirements across a variety of categories including energy, air quality and water usage. Certified buildings are typically more energy and cost efficient and create healthier work environments for employees. In addition to being more environmentally friendly, green-certified buildings can offer tax benefits. Many states offer tax incentives for green building projects, based on either energy savings or reaching a certain level of certification. Real estate studies have also shown that green buildings sell and lease faster than traditional buildings, and garner higher rents and lease rates. At W. P. Carey, we’re committed to achieving green-building certifications where we can, and our portfolio includes 6.6 million square feet of green-certified buildings as of June 30, 2024. In 2024, our state-of-the-art food research facility in the Netherlands received a BREEAM Outstanding certification, the highest level of BREEAM certification for buildings worldwide. Conclusion Reducing the carbon footprint of a net lease portfolio is an enormous challenge, but by bolstering tenant engagement and systematically identifying sustainability opportunities, progress is possible. Sustainable real estate is beneficial to the planet, attractive to tenants and improves the value of our broader portfolio, making it a win-win-win for all.
Why Tenant-Landlord Relationships Matter
Since our founding in 1973, W. P. Carey has been a long-term partner to our tenants. This means that when we invest in a property, we are also committed to advancing the tenant’s business and look to support their evolving real estate and capital needs throughout the duration of their lease and beyond. A Long-term Partner: Building Beyond the Original Transaction W. P. Carey partnered with Sonae MC, a leading Portuguese food retailer, in 2018 when it acquired its mission-critical warehouse facility in the Azambuja logistics park, Portugal’s prime logistics hub outside of Lisbon. Since its founding in 1985, Sonae MC has steadily grown its market share. Today, the company has more than 1,300 stores throughout Portugal and Spain, 35,000 employees and a broad range of products and services. At the time of the acquisition, Sonae MC was experiencing rapid growth, particularly through its city-center convenience stores and e-commerce operations. In order to meet rising demand and continue executing on its strategic plans, the company needed additional food distribution warehouse space. “In recent years, Sonae MC has been expanding its store portfolio, mostly with small, convenience stores; in the last decade, 750 new stores were opened. This growth will continue for the next few years to solidify even more of our dominant market share. This means our company’s logistics operation has to continue growing its warehouse footprint to be able to receive, prepare and ship an ever-growing number of merchandise," explained Rui Braz, Head of Area – Logistics Development at Sonae MC. To support Sonae MC’s growing business, W. P. Carey partnered with the company and agreed to fund a $28 million expansion of the Azambuja facility. Completed in 2020, the 300,000-square-foot expansion was custom built to Sonae MC’s specifications and totaled over 840,000 square feet, making it the largest refrigerated warehouse in Portugal. With the additional space, Sonae MC was able to increase its capacity and speed of supply to Mainland stores in the central and southern regions of Portugal. “The Azambuja expansion was part of a plan to strengthen our logistic capability, which makes it a fundamental piece to the company’s strategy,” said Braz. A Shared Vision: Committing to a Greener Future Our ability to support our tenants’ real estate needs goes beyond just expansions. We can also partner with our tenants on projects to help reduce their carbon footprint and meet their sustainability goals. W. P. Carey and Sonae MC are both committed to creating a greener future, which meant the expansion of the Azambuja warehouse was built with sustainability in mind. In 2021, a solar roof generating an estimated 4,000 MWh/year was successfully installed on the newly expanded facility, earning a LEED Gold certification for the property. This makes the facility Portugal’s first LEED Gold certified warehouse, an exciting milestone for W. P. Carey, Sonae MC and the country as a whole. “Receiving a LEED Gold certification for our new building in Azambuja, being the first in Portugal and, on top of that, the first for a refrigerated warehouse, is an important acknowledgement of our focus on sustainability. The thought that was put into multiple aspects like the isolation of the building, rainwater utilization system, and the investment in the photovoltaic solar plant–that reduces 30% of our electrical power grid needs for the entire facility–clearly portrays our intention in diminishing the operation’s environmental footprint,” Braz added. The new building is also equipped with innovative cooling and insulation systems that are more energy efficient and environmentally friendly. The joint delivery of fresh produce allows 20% fewer deliveries to shops, a reduction of 1.4 million km traveled per year and the equivalent of 1,100 tons of CO2 saved per year. A Win-Win: Long-term Benefits for Both Tenant and Landlord W. P. Carey prides itself on serving as a long-term, flexible partner to its tenants. By building strong relationships we are able to not only understand the business objectives of each tenant, but also their unique corporate values. In the case of Sonae MC, we were thrilled to have the opportunity to support them and their business needs, while also advancing our goal of reducing the carbon footprint of our overall portfolio. “W. P. Carey has had a fundamental role in the development of this project, proving to be the right partner along the entire process of building this warehouse and its sustainability and efficiency features, which we’re all proud of,” Braz concluded.