Industrial real estate across the Western U.S. is entering a new phase shaped by technology, infrastructure constraints and evolving supply chain strategies. While the sector remains fundamentally strong, the drivers of demand – and the challenges of delivering new space – are shifting.
A panel of industry leaders at NAIOP’s I.CON West this week explored how artificial intelligence, advanced manufacturing and infrastructure needs are redefining logistics markets from Silicon Valley to Phoenix.
The discussion was moderated by Melinda McLaughlin, senior vice president and global head of research at Prologis, and featured Rachel Hickenbottom, senior vice president of development at Link Logistics Real Estate; Amanda Eastwick, SIOR, CCIM, director of Cushman & Wakefield; Laurel Casey, principal of acquisitions at Marq Logistics; and Abbie Wertheim, partner at Panattoni Development.
Across the conversation, one theme surfaced repeatedly: Industrial demand in the West is evolving quickly – and power availability is becoming one of the most critical variables shaping the next wave of development.
AI AND ADVANCED MANUFACTURING ARE RESHAPING DEMAND
Panelists began by examining technology-driven markets such as Silicon Valley and Seattle, where new waves of innovation are driving demand that extends beyond the tech sector. For instance, in Northern California, as companies expand manufacturing related to artificial intelligence – servers, robotics, semiconductors and advanced electronics – the impact spreads throughout the logistics ecosystem.
“You’re seeing manufacturing happening in these tech hubs,” said Wertheim. “But that activity also impacts the supply chain around it – warehouse space for inbound goods and distribution space to move those products out.”
Because highly constrained markets like Silicon Valley have limited land available for industrial development, the demand often spills into surrounding regions where larger buildings can be delivered more easily. The result is a ripple effect across nearby logistics markets, particularly in Northern California’s Central Valley.
SOUTHERN CALIFORNIA REMAINS THE BACKBONE OF WEST COAST LOGISTICS
The panel then turned to Southern California, long considered the epicenter of West Coast logistics due to its port infrastructure and connectivity to global trade. The region has experienced dramatic swings in recent years – moving from unprecedented demand during the COVID-19 pandemic-era supply chain surge to a period of market normalization. Panelists acknowledged that the market is still absorbing industrial projects that began during peak demand and delivered into a softer leasing environment. But they also pointed to encouraging signs that supply is stabilizing.
Certain industries – including aerospace, defense and advanced manufacturing – continue to drive leasing activity, particularly for modern facilities that offer strong functionality and sufficient electrical capacity. Despite cyclical fluctuations, panelists emphasized that Southern California’s strategic importance remains unchanged.
“When supply chains are moving quickly, Southern California is one of the best places to be,” said McLaughlin. “You get our hands on goods straight away…although the global market supply chain is moving pretty slowly. Consumers and businesses are cautious.”
PHOENIX AND LAS VEGAS EMERGE AS MAJOR LOGISTICS HUBS
Panelists highlighted growing momentum in Southwest logistics hubs such as Phoenix and Las Vegas. Las Vegas has recorded nine quarters of positive absorption and increased activity in large-format industrial leasing. Much of that demand is linked to companies expanding beyond Southern California in search of larger buildings and more flexible development environments.
“I don’t think Phoenix should be considered a secondary market anymore,” said Eastwick. “It has the workforce, the demand drivers, and the ability to build the kinds of facilities that many occupiers need.”
With a population exceeding 5 million, a strong labor pool and major manufacturing investments – including semiconductor production – the Phoenix region now supports one of the largest industrial inventories in the country. Equally important, developers can often deliver large-scale industrial facilities there with fewer regulatory and land constraints than coastal markets.
POWER IS BECOMING THE INDUSTRY’S NEW CONSTRAINT
Panelists repeatedly emphasized that electrical capacity has become one of the most important considerations in industrial development. Automation, robotics and AI-driven operations are significantly increasing the power requirements inside logistics and manufacturing facilities.
“Power is now part of the conversation from day one,” said Hickenbottom.“We’re designing buildings so they can expand electrical capacity in the future, because tenants increasingly need that flexibility.”
Developers are responding by planning infrastructure upgrades earlier in the development process and designing buildings that can accommodate higher electrical loads. In some cases, projects are even exploring private infrastructure solutions to secure the power needed for modern operations. The challenge is that power availability can be difficult to predict. Eastwick said, “So much depends on the location relative to available power.”
BUILD-TO-SUIT DEVELOPMENT IS GAINING MOMENTUM
Taking power needs, the workforce and lightning-fast-moving AI, robotics and accompanying infrastructure into consideration, build-to-suit development makes financial sense. Many tenants now require facilities designed specifically for their operations – whether that means specialized manufacturing layouts, expanded power capacity, or customized truck circulation.
“Companies are looking for efficiency in their operations,” said Wertheim. “Larger, customized buildings can help them move product faster and run their logistics networks more effectively.”
Developers who maintain a pipeline of entitled sites and development-ready land are best positioned to respond quickly when those opportunities arise.
CHALLENGES REMAIN – BUT OPPORTUNITIES ARE EMERGING
When asked about risks facing the industrial sector in the West, panelists pointed to tenant caution and regulatory complexity. Some occupiers remain hesitant to make long-term commitments while economic uncertainty persists, opting instead for shorter-term strategies. Regulatory hurdles – particularly in California – continue to influence development timelines and feasibility. However, the panel highlighted emerging opportunities for investors and developers.
In some cases, industrial properties can now be acquired at prices approaching – or even below – replacement cost. For investors with long-term strategies, those conditions can present attractive entry points. Rather than sitting on the sidelines, tenants willing to take a calculated risk may come out ahead.
McLaughlin said, “Act now. It won’t get better.”
This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s I.CON West 2026. Learn more about JLL at www.us.jll.com or www.jll.ca.
