Three Ways Supply Chain Disruptions are Impacting the Commercial Real Estate Market
Rising demand for warehouse space, re-shoring and last-mile logistics among the biggest trends
The emergence of the coronavirus in early 2020 caused a drastic slowdown in supply chains across the globe. Labor shortages, fluctuating consumer demand, disruptions in shipping lanes, COVID-19 restrictions as well as general economic uncertainty caused major disturbances in the flow of goods. The war in Ukraine further compounded these issues by cutting off the supply of critical raw materials and ratcheting up energy costs. These disruptions have caused several challenges and opportunities for commercial real estate as the industry focuses on restoring the reliability of the global supply chain. Here are three of the most significant impacts:
Rising demand for warehouse space
During the pandemic, many companies struggled to restock in-demand products driven by a steep increase in online orders amid global lockdowns. Once lockdown restrictions loosened, this led to an “inventory bullwhip effect” as companies over-purchased merchandise to avoid future inventory shortages. Sustained supply-chain bottlenecks led retailers to continue over-purchasing—shifting from “just-in-time” inventory management to a “just-in-case” model in an effort to keep more inventory onsite. As a result, the demand for warehouse space skyrocketed.
The impact of this rising demand is significant. On one hand, warehouse sellers can get a significant premium for their property if they pursue a sale-leaseback of their real estate. However, companies looking to acquire or rent warehouse space might have a difficult time as vacancies are at record lows—for U.S. industrial properties it’s just 4.1%. Supply chain disruptions causing delays in construction materials also increase the build time for new warehouses, meaning many companies are left waiting several years for the space they need to accommodate today’s surging retail inventories.
From an investor perspective, rising demand often translates to low cap rates for well-located warehouses despite inflationary pressures and rising interest rates. However, the shortage in available space also enhances the criticality of these properties to tenants, making them less likely to vacate at the end of the lease term.
Re-shoring supply chains
Supply chain disruptions highlighted the risk of off-shore operations for many manufacturers. As a result, many manufacturers are making the decision to re-shore their production facilities to protect against such disruptions in the future. In fact, in 2021, a record 1,800 companies re-shored their production operations in the U.S.
Companies looking to re-shore production are choosing locations with a high availability of land for development, a large pool of skilled labor and well-developed transportation infrastructure including railways and ports. This has led to an increase in development in the Midwest and South due to both regions’ access to rail infrastructure and seaports respectively.
While re-shoring has contributed to the rising demand for warehouse space, it has also opened up new opportunities for investors as companies look to rent existing warehouses in tertiary markets that may not have historically been attractive, but have access to transportation infrastructure and land available for development.
Increased interest in last-mile logistics space
With limited warehouse space available, companies are having to get creative with their distribution strategies. One such method is through last-mile warehouses, which facilitate the movement of goods in the supply chain to the final destination. These warehouses are typically located close to the consumer and therefore decrease supply-chain costs while minimizing delivery time. As a result, warehouses situated near major highways and bridges that lead into metropolitan hubs are becoming highly in-demand for companies looking to make their distribution network more nimble. This presents an opportunity for investors who own these types of facilities to capitalize on demand and secure high-quality tenants on long-term leases.
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REITs are working to find a seat at the table as active buyers for commercial real estate property as the transaction market regains momentum. One sign that REITs are positioning to take advantage of buying opportunities is a recent flurry of equity raising. Five REITs went to the market with secondary offerings in February, raising a combined $1.3 billion. W. P. Carey Inc. (NYSE: WPC) raised $496.8 million Essential Properties Realty Trust, Inc. (NYSE: EPRT) raised $350 million NETSTREIT Corp. (NYSE: NTST) raised $208 million Curbline Properties Corp. (NYSE: CURB) raised $204 million Getty Realty Corp. (NYSE: GTY) raised $131 million W. P. Carey is coming off a record $2.1 billion in new acquisitions in 2025. “It's a really good market right now for us. The stability in interest rates has brought bid-ask spreads in, and sellers who have been on the sidelines for the last few years are now back into the market. So, we took advantage of that in 2025,” says CEO Jason Fox. The company is targeting primarily manufacturing and logistics facilities, as well as select retail, both in the United States and Europe. The REIT is poised for more growth in 2026 thanks to a strong balance sheet that includes roughly over $850 million in equity forwards, a credit facility of more than $2 billion that is largely undrawn, and annual free cash flow of about $300 million per year. The company has issued conservative guidance for acquisitions of between $1.25 billion and $1.75 billion, with the expectation that those numbers will be adjusted depending on how the year progresses. “Our cost of capital is as strong as it's been for quite some time. That supports accretive investment activity, and it allows us to be competitive on pricing when needed,” Fox says. “I think a lot of REITs find themselves in a similar position.” For all those reasons, REITs are likely to be more active acquirers this year. That's reflected in deal volume to date, as well as many of the guidance numbers for 2026, he adds. Across the board, it’s safe to say that REITs have been preparing for an acquisition spree. “Operationally, REITs are very much ready to handle a significant increase in number of properties, and some of that's being helped by the technology investments that companies have been making to be efficient and manage more with less,” says Matthew Werner, managing director, REIT strategies, at Chilton Capital Management. REITs also have worked to strengthen balance sheets. Many are under-levered with some of the lowest debt ratios they’ve ever had and very low levels of floating-rate debt specifically. “They have tons of capital capacity, but except for a few sectors, their cost of equity doesn’t make sense for them to go and do transactions,” Werner says. 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The REIT kicked off 2026 with the January announcement of a $142 million acquisition of six skilled nursing facilities in the Mid-Atlantic region. “We've always said, if you’ve got it, flaunt it, and we’re seeing that now from a lot of these health care REITs where they are appropriately using that cheaper cost of equity to be acquisitive in the markets they operate in,” says Daniel Ismail, co-head of strategic research, managing director, at Green Street. Health care REITs have the added benefit of finding good buying opportunities within sub-sectors, particularly in senior housing, he adds. Net lease is another sector that has been leveraging its cost of capital advantage to make accretive acquisitions. And many of the same players that were active last year expect to keep their foot on the gas. For example, Agree Realty acquired $1.45 billion in retail net lease properties last year, and the company recently increased guidance for 2026 to $1.6 billion to be deployed across its three external growth platforms. “Our pipeline to start the year is very healthy, filled with typical assets and pricing that investors would anticipate from Agree Realty,” says CEO Joey Agree. However, the REIT is watching to see how the expectation of lower interest rates this year will play out in terms of pricing, sellers, and the competitive landscape. “One important misconception is that publicly listed and private capital are chasing the same assets,” he adds. “It’s important for investors to understand the size and scope of the net lease market and appreciate the divergent strategies and execution of the many players.” Positioning for Acquisitions On the opposite side of the spectrum, a number of sectors are trading at discounts to NAV of between roughly 10% and 20%, including office, apartments, industrial, self-storage, and lodging. REITs in those sectors are still buying assets, but they are less active. “It will be hard to see them ramp up acquisition activity throughout 2026, and they likely will be highly selective in the type of deals they do,” Ismail says. Digging into individual property sectors, there are multiple examples of companies that have done a lot of hard work to put themselves in better positions for the acquisitions to “turn back on,” Werner adds. “The market is paying attention to that and rewarding these companies,” he says. FrontView REIT, Inc. (NYSE: FVR), for example, was able to source a convertible preferred investment and now has the opportunity to prove their acquisition strategy. As a result, their share price is on a path toward being able to issue common equity again, and the company will be able to continue acquisitions after they use the cash from the convertible preferred issuance, Werner notes. REITs also have another lever to pull that could give them an edge in acquisitions—the ability to utilize the tax advantages of the REIT structure to allow private operators to sell their assets to REITs. Instead of a cash sale, an owner could consider an UPREIT, which would allow them to transfer their basis into operating partnership (OP) units. There have been one or two examples of that in strip centers, which has been experiencing good fundamentals. “So, we could see a few more of those as the year goes on,” Ismail says. Outlook for M&A Activity In addition to property sales, the environment could be more conducive for M&A deals this year, both in public-to-public and take-private deals. One recent announcement was the acquisition of Veris Residential, Inc. (NYSE: VRE) by a group led by Affinius Capital for $3.4 billion in cash. “If the math doesn't work for a REIT to go buy something on the private market, why not buy a public peer with an exchange,” Werner says. “I think the sector is ripe for that, but I do think that it's also ripe for take-privates because the debt markets are very open.” Many of the M&A deals that have occurred in the last year were take-privates that involved deals below $3 billion. Some of those transactions are getting done in “chunks” with perhaps one buyer acquiring a large portion of the portfolio, with other assets or smaller portions being sold off separately, Hentschel notes. For example, Aimco is reportedly sold seven of its Chicago-area properties to an investment group for $455 million as part of its liquidation. Buying Opportunities Ahead REITs could find more buying opportunities ahead in a market where transaction volume is rising and the bid-ask pricing gap between buyers and sellers is narrowing. Although transaction markets have not been entirely frozen, the inventory of for-sale properties has been thin, with more sellers that have opted to hold onto properties and wait out market volatility. “There was plenty of liquidity, but there was a bid-ask gap between buyers and sellers, and now that gap is closing, and more product is coming to market,” Hentschel says. In its 2025 Year-End Real Estate Trends Report, DLA Piper is predicting that U.S. commercial real estate transaction volume will increase by another 15% to 20% this year. “We expect REITs will be most active in sectors perceived to benefit from multi-year tailwinds such as health care and housing-related assets, including senior housing and multifamily properties,” Connolly says. Data centers are likely to continue to command interest, as well as manufacturing and logistics due to supply chain challenges, continued expansion of e-commerce, and on-shoring. “Public REITs have been challenged by the gap between how the public market values their stock and how the private market values the underlying real estate,” Connolly points out. “However, as private market values continue to adjust to the new reality, this headwind should diminish.”
MIPIM 2026: Where Capital, Conviction and Opportunity Converge
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Forging Long-term Partnerships Through Tenant-centered Real Estate Solutions
At W. P. Carey, we view real estate as a long‑term partnership — not a one‑time transaction. We stay closely connected with our tenants, aligning our capital and real estate expertise with the evolving needs of their businesses. That philosophy is embedded in Carey Tenant Solutions, our platform designed to support tenant growth beyond the initial acquisition. Through follow‑on investments, we help tenants modernize, expand, redevelop, relocate and improve the energy efficiency of their facilities — allowing them to focus capital on what matters most: running and scaling their core business. Below is an overview of the core capabilities within Carey Tenant Solutions and how each can benefit existing and prospective tenants. Build-to-suits In a build‑to‑suit, W. P. Carey funds and manages the construction of a new facility — or the expansion of an existing one — tailored to the precise specifications of a prospective or existing tenant. Upon completion, the tenant enters into a long‑term net lease while retaining full operational control of the new or expanded facility. We offer two flexible approaches to build‑to‑suits: Build-to-suit financing: We provide construction capital while the tenant’s developer executes the project, either through traditional construction financing funded over time or via take‑out financing upon completion. Turnkey build-to-suit: We finance and manage the entire construction process, from site selection to final delivery. For tenants, the primary advantage of a build‑to‑suit is capital efficiency. Rather than tying up their capital in real estate, tenants can redeploy resources toward growth initiatives, innovation or strengthening operations — while still gaining a facility designed specifically for their needs. Learn how this approach helped support our tenant Cuisine Solutions’ growth. Redevelopments W. P. Carey offers comprehensive redevelopment capabilities, managing projects from initial design through delivery. Combining our internal development expertise and long‑standing relationships with leading architects, consultants and contractors, we assemble experienced teams capable of executing even the most complex redevelopment projects. Our redevelopment capabilities span: Repositionings, where we upgrade, modernize or expand an existing building while maintaining its core use. Redevelopments, which involve unlocking value of infill locations through adaptive reuse and ground up construction of state-of-the-art, primarily industrial, properties that meet the demands of modern occupiers. W. P. Carey’s turnkey redevelopment process is comprehensive and includes: Pre-construction planning and optimization Development feasibility and due diligence Zoning and entitlement approvals Design and permitting Budgeting and scheduling Construction management Creative lease structures Sustainable development Overall efficiency Our proactive approach allows us to work directly with incoming tenants to shape a property around their exact operational requirements, while enhancing the quality of our portfolio by retaining the best positioned assets in the highest barrier-to-entry locations. Learn more about our carbon-neutral redevelopment of a Class-A warehouse for a global IT services company. Energy Solutions Through Carey Tenant Solutions, we also help tenants reduce operating costs and advance their sustainability goals by designing, funding and implementing renewable power and energy efficiency projects directly at their facilities. We believe that improving the quality and sustainability of our assets delivers tangible benefits across our portfolio — increasing renewal probabilities, strengthening tenant relationships and enhancing long‑term asset value – all while helping our tenants reduce their carbon footprint. Our energy solutions include: On‑site renewables, including CareySolar® Efficiency retrofits, such as LED lighting upgrades Smart building technologies, including IoT‑enabled metering Green infrastructure, such as EV charging stations and battery storage Carbon‑neutral construction By integrating these solutions into our long‑term ownership strategy, we help tenants operate more efficiently today while building assets that are better positioned for the future. Read how we collaborated with our tenant, a healthcare products distributor, to fund a rooftop solar installation. A Platform Built on Partnership Collaboration with our tenants — and support beyond the initial transaction — has always been core to how we operate at W. P. Carey. With Carey Tenant Solutions, we have formalized and unified those capabilities, bringing decades of experience together under a single platform to deliver one of the most comprehensive tenant service offerings in the net lease industry. Interested in exploring Carey Tenant Solutions? Get in touch today.