The national industrial market experienced a year of significant flux in the past year, positioning 2026 as a year that will be defined by growing power availability concerns, increased complexity in the small bay sector, and the rise of IOS as an investment focus. In New Jersey, New York and South Florida, three of the most active industrial markets in the U.S., those forces will continue to influence leasing, development and investment well into the new year.
Perhaps the most transformative change in 2025 was the emergence of power availability as a dominant concern for industrial growth. Tenant utility demands reached levels the industry has not seen before, with cold storage operators, fulfillment users and light manufacturers and users with EV fleets all requiring more electrical capacity than most infill buildings were designed to support. Robust electrical power capacity has become a true differentiator, with many active requirements today driven as much by utility availability as real estate elements. And increasingly, it’s not just power: other utilities such as water, gas, and fiber connectivity are also becoming critical site selection factors. In fact, numerous assets are drawing interest primarily because of their power profiles. In a region where utility infrastructure is strained and upgrades are slow and costly, power is now top of mind. It is becoming a competitive advantage and, in many cases, a deciding factor in leasing and acquisition decisions. Utility capacity is increasingly part of what defines “quality” in modern industrial space.
At the same time, the past 12 months were marked by shifts in speculative industrial development, especially in the small-bay and mid-bay categories that define so much of the New Jersey and outer-borough New York landscape. However, elevated land prices, increasing operating costs, zoning and entitlement challenges and elevated construction costs have made small bay investments extremely difficult to pencil out for entities without an in-house team and without on-the-ground experience. With fewer small-bay projects breaking ground and limited deliveries on the horizon, tenant demand has increasingly been pushed toward existing second-generation inventory. In many New Jersey submarkets, the availability of quality second-generation Class A and B+ space has continued to tighten as tenants prioritize functionality and trade up where possible. With limited inventory, increased demand and few future deliveries, tenants have found themselves competing for functional space while owners have benefitted from tightening fundamentals.
Another defining dynamic entering 2026 is the “flight to quality” now taking hold across many infill industrial markets. Tenants are increasingly trading up from older Class B space into newer, more efficient Class A facilities, often taking less square footage while gaining higher clear heights, more loading capacity, improved yard and trailer storage, and stronger utility infrastructure. This shift is creating knock-on effects across the market: Class B ownership is under growing pressure to reinvest, reposition, or compete more aggressively on economics, while many Class A owners, facing longer-than-expected lease-up timelines, are subdividing
larger buildings and offering concessions that would have been unlikely in tighter conditions. The result is a more competitive, tenant-driven leasing environment in the near term, but one that is steadily tightening as vacancy is absorbed and major users re-enter the market with renewed planning conviction.
2025 also became the year that IOS, Industrial Outdoor Storage, and low-coverage sites completed their transition from overlooked niche properties to fully institutional assets. The shift is underscored by new investment partnerships planning for 2026 as a year to scale portfolios of paved, fenced, and enhanced industrial outdoor sites tailored for a diverse mix of operational users.
What were once viewed as gritty parcels are now essential logistics infrastructure for EV fleets, equipment operators and last-mile users whose needs have evolved beyond traditional warehouse boxes. With significant zoning and entitlement restrictions preventing the creation of new IOS sits, corporate backlots and semi-industrial parcels are increasingly being repositioned into high-value logistics hubs, a shift that will be further driven long-term by electrification, fleet growth and the demands of modern distribution.
A quieter, but equally important, force is also helping to define the market: the surge in corporate real estate dispositions. Many Fortune 500 and 1000 companies have continued to rationalize their real estate footprints, selling specialized, non-core facilities that no longer align with post-pandemic operations. Sitex has acquired and repurposed several corporate-owned properties, transforming former single-purpose buildings into modern operational facilities. These projects demonstrate how spaces such as claim centers, training facilities, and similar legacy assets can be reimagined for contemporary industrial or fleet-related uses. In a supply-constrained market, such adaptive-reuse opportunities offer a valuable pathway to creating well-located semi-industrial space.
The past year demonstrates that the industrial sector in the Northeast is increasingly defined as much by infrastructure, adaptability and scarcity as it is by location and square footage. In an environment where tenant requirements are more complex and utility demands continue to rise, the firms best positioned for the next cycle will be those that can navigate regulatory challenges, move quickly on unconventional sites and unlock value in assets overlooked by traditional players. These shifts are also creating acquisition and value-creation opportunities as legacy assets become available and owners face new pressure to modernize or recapitalize their portfolios. For markets like New Jersey, New York City’s outer boroughs and South Florida, industrial real estate will continue a rapid evolution to meet the demands of market fundamentals and shifting supply profiles.
Zach McHugh is the principal of Sitex Group.
