Shocks to the System: Market Durability Is the New Lens for U.S. Industrial Amid Permanent Volatility

Why Now: Consecutive Shocks Have Shaped the Operating Environment 

Each major shock of the last several years has exposed new pressure points and driven permanent changes in occupier strategy, making the case for market durability stronger than ever. Across all three, the common lesson is that distance amplifies disruption: the more labyrinthine a supply chain, the more links available to break. The industrial real estate market is, at its core, a map of supply chain geometry being redrawn in real time. Occupiers are responding by streamlining and simplifying, reshoring some high-value production, consolidating into modern and efficient facilities, diversifying freight modes, and positioning closer to end consumers. The goal across all of these moves is the same: building resiliency amid the unexpected.  

Shock 1: The Pandemic Surge and Inflation Hangover (2020–2023) 

When COVID-19 shuttered global production and redirected consumer spending from services to goods almost overnight, the industrial real estate market experienced the most compressed and inflationary cycle in its history. Vacancy fell to historic lows, asking rents grew 30–40% or more year-over-year in key markets, and development surged to all-time highs. But the boom came with a cost. The same dynamics that made industrial real estate invaluable—intense demand, supply scarcity, logistics congestion—also helped seed the inflation that followed. To quell inflation, the Federal Reserve executed the fastest interest rate hiking cycle in 40 years, repricing entire capital stacks. Occupiers who had spent 2020–2022 securing any available space began recalibrating. By 2023, deliveries outpaced demand, vacancy began climbing, and the market entered a normalization cycle that is only now approaching equilibrium in 2026. 

Permanent Market Impact: An era of derisking began, marked by acceleration in reshoring, nearshoring, and friendshoring activity for critical industries. Roughly half a trillion dollars in major U.S. manufacturing expansion was invested from 2020 through 2023. This shift also reinforced supply chain redundancy and diversification; a more cautious development risk tolerance; and higher-for-longer cost of capital expectations. 

Shock 2: Miasma of Trade Policy Uncertainty (2025–Present) 

Beginning in early 2025, U.S. tariff policy entered a state of near-continuous revision, averaging fewer than five days between policy changes throughout the year. Effective tariff rates rose to levels not seen since the early 20th century. The result was less a collapse in demand than a paralysis in decision-making, although 2Q25 recorded the lowest absorption in more than a decade. Occupiers poised to sign leasing commitments paused and global supply chains that had already started restructuring after the pandemic faced another round of reconfiguration. Industrial demand has since resumed as many companies incorporate permanent tariff risk into long-term strategy, but absorption remains generally below pre-2020 averages. 

Permanent Market Impact: Reshoring, friendshoring, and nearshoring production continued, with 2025 domestic investment in manufacturing reaching a three-year high. United States–Mexico–Canada Agreement (USMCA) -corridor markets like Dallas and Kansas City are increasingly favored as freight paths are rewritten and Mexico’s role at the center of U.S. trade flows becomes even more pronounced. In 2025, Mexico became the United States’ number one trading partner for both imports and exports for the first time in at least 30 years. Corporate cost modeling that explicitly incorporates tariff risk is becoming standard practice for many large companies. 

Shock 3: Fuel Spike (2026–?) 

This latest shock is unfolding in real time as Middle Eastern conflict has pushed fuel prices higher after several years of gradual decline, a trend that had partially provided a salve to tariff-driven costs last year. This shock differs from the previous two in that it represents an acutely painful but ultimately cyclical stress on the market. Oil prices have come down after every previous oil spike in modern record, and the U.S. faces far less risk of fuel shortages than many other countries. Still, fuel spikes spare no one – it ripples deeply through manufacturing and supply chains. For logistics occupiers, transportation is the single largest expense, comprising 60% of total business logistics costs, with fuel accounting for approximately 30% of that figure. Even a modest increase immediately erodes margin and makes the true cost of long, truck-dependent supply chains visible in the Proft and Loss statement (P&L). For consumers, higher fuel prices directly reduce discretionary spending, as price elasticity determines how much household income gets diverted toward fuel. The longer this spike persists, the more it will have cyclical impacts on the market, and act as an accelerant for the structural shifts the previous two major shocks set in motion. 

Permanent Market Impact: In isolation, impact is limited, but in a continuum with other shocks, this fuel spike will accelerate a shift toward rail over trucking and reinforce the value of transportation mode optionality. It is yet another argument for the “make where you sell” thesis driving generational domestic manufacturing investment. In addition, this episode may prompt restoration of some U.S. strategic oil reserves as a buffer against future spikes. If Iran were to maintain control of the Strait of Hormuz, the risk premium on oil would likely become structurally higher. 

What This All Means for Market Stability This Year 

The next wave of lease decisions may make resiliency reckoning more visible. An entire generation of leases were signed at post-pandemic rents, and more than 1.3 billion square feet of industrial leases are rolling in the next few years. With fuel costs now eroding margins and consumer discretionary spending potentially under pressure, occupiers facing these decisions are closely scrutinizing footprint efficiency. The most modern space will continue to win out, but 2026 could see less net absorption than initially forecasted in January.  

For investors, buildings that maximize efficiency and markets that promote resilience will continue to attract durable demand, and the data confirms it. Rent growth prospects are meaningfully higher in top-scoring durability markets than in lower-scoring ones. This does not mean every occupier needs to be in Dallas, Southern California or Chicago—many have operational reasons to be in markets that score lower on Newmark's index. But the traits that define higher-scoring markets are increasingly the ones occupiers prioritize when making location decisions. Investors can leverage these durable markets further by proactively partnering with occupiers, and their upstream and downstream partners to co-invest in scalable power infrastructure and modal solutions, unlocking growth for occupiers while continuing to raise investment value for the broader industrial ecosystem. 

Newmark Industrial Research will be further exploring the theme of durability and market positioning over the coming quarters with additional reports and analysis. For detailed methodology on the Market Durability Index, see the Appendix below.

Appendix | Market Durability Index Methodology 

Index Architecture at a Glance 

The Market Durability Index converts a wide range of market characteristics into a single score designed to support real estate decision-making. Raw market-level inputs are standardized as z-scores, allowing fundamentally different types of data to be compared on a common statistical basis across markets. Where a lower raw value is more favorable, the scoring is reversed so that higher values consistently reflect stronger market positioning. Metric-level z-scores are then averaged into category-level composites and combined into the final index shown in this paper. In practical terms, the framework is designed to identify the markets with the strongest combination of demand access, freight flexibility, manufacturing relevance and modern supply. 

Metric Dictionary by Category  

Reading the Scores 

The index is centered on 100, representing the peer-set average. Scores above 100 indicate above-average positioning; scores below 100 indicate below-average positioning. Because the framework is z-score based, distance from 100 reflects a standardized deviation from the average, giving results more statistical precision than a simple ranking system. The Market Durability Index is best read as a relative market-positioning tool rather than a precise forecast of performance.