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The industrial real estate market has entered a 鈥減eriod of recalibration鈥� after rapid expansion since 2020, according to a new report from Cushman & Wakefield.

Developers have delivered more than 171 million square feet in warehouse, distribution and manufacturing space in the Pacific Northwest since 2020, and vacancies have risen as a result.

In the Portland market, vacancies have risen from 2.7 percent in the third quarter of 2023 to 7.8 percent in the first quarter of this year, Kidder Mathews reported.

鈥淎fter an unprecedented period of growth, the Northwest industrial market entered a period of recalibration,鈥� Cushman & Wakefield research manager Wescott Owen stated in a news release. 鈥淒evelopers are taking a more disciplined approach by prioritizing projects with clear tenant demand and long-term fundamentals, which will ultimately support a healthier and more sustainable market.鈥�

Power availability is driving site selection as logistics operations compete with data centers, according to the Cushman & Wakefield report.

Tariffs have hit import-driven and export-driven industrial areas harder, with port-adjacent properties facing hurdles.

鈥淎 couple of years ago, if you could get a project built, you could feel pretty good about getting it leased pretty quickly,鈥� said Brent Hedberg, president of Specht Development. 鈥淭oday, demand is certainly slower and more selective. It’s not super-consistent. It’s low in some areas and high in others.鈥�

Demand remains steady in Clark County, Washington, and the Sunset Corridor, Hedberg said. Close-in Portland, Airport Way and the Columbia River corridor are facing more challenging conditions.

On Thursday, Colliers revealed that Meadowlark Industrial Center, a 154,646-square-foot facility in Cornelius, had sold for $30 million, or approximately $193 per square foot. The brokerage stated that the sale demonstrated 鈥渋nvestor appetite鈥� for the Sunset Corridor submarket.

Tenants have become more specialized and are more likely to demand build-to-suit spaces than empty boxes built on speculation, Hedberg said.

A recent Specht project for Grainger, an industrial parts distributor, illustrates the change. The 533,000-square-foot warehouse in Gresham was built with robots in mind, including ultra-flat floor slabs, additional power and no skylights.

鈥淭he more companies look at automated robots to pick stuff, those are tougher to fit in a speculative empty box,鈥� Hedberg said. 鈥淭here are unique requirements.鈥�

Speculative development still has a place, particularly for tenants who don’t want to endure long wait times and entitlement risk on a build-to-suit project, Hedberg said.

Tenants want taller, modern buildings with adequate space for trucks and LED lighting throughout, Hedberg said.

鈥淭here’s a bifurcation,鈥� he said. 鈥淚f you have second-generation space that’s just not quite what people are looking for, you’re having a little harder time.鈥�

Owen also forecast that targeted future development could succeed.

鈥淭he recent slowdown may prove to be an overcorrection in certain segments,鈥� he stated. 鈥淔or developers and investors who can align product with evolving tenant needs, there will be opportunities as the market stabilizes and moves into its next phase.鈥�

Broadly, tenants are wary of geopolitical disruption and 鈥� in Multnomah County 鈥� high taxes, said Jordan Schnitzer, president and CEO of Schnitzer Properties.

鈥淲hen I started out decades ago, I didn’t worry about what was going on in China or Russia,鈥� Schnitzer said. 鈥淧eople worry about that now. The ICE raids are scary.鈥�

High interest rates and unrest are causing consumers and businesses to act more cautiously, Schnitzer said.

鈥淧eople are just worn out from what’s happening nationally now and internationally,鈥� he said. 鈥淲hat we need is consumer confidence so the consumer can buy the goods and services our tenants offer.鈥�