Industrial tenants are buying freight position, not warehouse term

The U.S. industrial market has reset and normalized since the pandemic, but the occupiers who powered the boom have come back demanding flexibility, transportation economics, and the ability to adjust a footprint without signing away years. In a Commercial Observer interview, James Holbrook, founder of the short-term industrial leasing platform Warehub, frames the shift less as a mood than as an arithmetic problem, and the arithmetic favors tenants who refuse to commit.

The arithmetic is CBRE's. Transportation runs roughly 45 to 70 percent of total logistics costs against 3 to 6 percent for fixed facility costs such as rent, according to brokerage figures cited in the coverage, and when freight outweighs occupancy by that margin the rent line stops driving the decision. Leasing an additional warehouse in the right location, even a temporary one, can pay for itself if it shortens a truck's route or pulls a delivery window forward; landlords have spent a decade selling term, and their tenants are shopping for position.

The tenant mix is moving the same way: CBRE's 2026 mid-year industrial outlook reported third-party logistics leasing up 19 percent from a year earlier, with 3PLs potentially accounting for more than 35 percent of U.S. industrial leasing this year. Those users tend to want shorter lease terms, smaller footprints, and more flexible space, and CBRE's occupier survey put lease flexibility among the most important considerations in selecting a building. A landlord signing a 3PL is underwriting a different occupant than one signing a large-format retailer to a ten-year term.

Warehub was built for the gap that opens when those two tenants want the same building, standardizing short-term industrial leases of up to one year so landlords can monetize space between long-term commitments while occupiers get temporary distribution capacity. The company says it has onboarded more than 52 million square feet of industrial space nationwide, a concept that grew out of more than 2,500 transactions completed during its research-and-development phase, and Holbrook frames the platform as a response to the constraints modern commerce runs into inside what he calls the static infrastructure of traditional industrial real estate.

On-demand warehousing remains a small slice of industrial real estate, small enough that its absolute size is the wrong thing to fixate on, and a Mordor Intelligence market study cited in the coverage estimated that storage arrangements of less than one month already accounted for more than half of the on-demand sector in 2025. The part worth watching is that the shortest commitments are taking the biggest share of the smallest market.

That is where the sector's pricing gets harder than its occupancy charts suggest: if freight is 45 to 70 percent of the cost stack and rent is 3 to 6 percent, industrial value increasingly turns on a site's position in a freight network rather than the years remaining on a lease. A long commitment from the wrong location is worth less than a rolling series of one-year deals from the right one. Owners who priced bulk boxes off term, treating the covenant as the thing that made a building financeable, are now competing for tenants whose first question is how fast they can leave.

Supply has not waited for the answer: this publication has reported on the second phase of the Trammell Crow and Daiwa House venture in Fort Bend County, where owner-occupant sales on Phase I justified another speculative start and pushed the project past 2 million square feet. Owner-occupancy and one-year leasing are different bets, though both answer the same dissatisfaction with the long-lease default: one buyer takes the building outright, the other declines to marry it.

For the private capital that has treated industrial as steady, bond-like income, the shift changes what is actually being underwritten: a long lease to a strong credit is a predictable stream, while a building that turns over annually is an operating business that wants different equity, different debt, and a different appetite for the quarters when space sits open. None of that argues for leaving the sector so much as for knowing which of the two assets is on the books, because the market has been pricing them as though they were the same asset.

The case against reading all of this as permanent runs through the vacancy rate: a landlord lists space for a one-year term when the alternative is a dark building, so in a tight market the incentive to monetize the gaps between tenants weakens and the short-term shelf thins. That makes some portion of Warehub's 52 million square feet a function of the cycle rather than a reordering of the asset class — the question at the center of the Commercial Observer interview being whether short-term leasing answers the current cycle or marks a lasting change. The honest answer is both at once, with the mix set by how much vacant space the market happens to be carrying.

The number to watch is 35 percent. If third-party logistics operators cross that share of 2026 leasing, 52 million square feet of on-demand capacity stops reading as a stopgap for vacancy and starts reading as the infrastructure the freight math has been pointing at all along.