Tariffs Reshape Auto Supply Chains, Driving New Industrial Demand
Tariff pressures and evolving North American trade rules are reshaping automotive manufacturing and logistics networks, creating new industrial real estate demand across key U.S. markets while vehicle sales and production remain under pressure, according to a new analysis from Cushman & Wakefield.
The firm's latest report on tariffs and commercial real estate construction costs found that U.S. auto sales continue running below pre-pandemic levels as automakers navigate higher costs tied to tariffs and supply chain adjustments. While buyers briefly accelerated purchases in March 2025 ahead of anticipated trade policy changes, demand has since weakened. In January 2026, vehicle sales fell to a seasonally adjusted annual rate of 15.2 million units, the lowest reading since December 2022.
Also, domestic auto production declined sharply in 2025, falling 10.3% year-over-year as elevated vehicle prices and the elimination of federal EV tax credits weighed on manufacturing activity.
The trade environment is forcing major shifts in logistics and industrial occupancy patterns.
Cushman & Wakefield said automakers and suppliers are increasingly diversifying sourcing strategies and expanding domestic operations to offset tariff-related costs.
Industrial demand from the automotive sector was strongest in the Southeast, Midwest and Southwest during the first quarter, with automakers and suppliers signing more than 6.7 million square feet of new leases nationwide. Among the largest deals was Hyundai Translead's 1.4 million-square-foot lease near Chicago.
Cushman & Wakefield said parts suppliers and OEMs are also building out domestic logistics infrastructure as more automotive components move through Texas from Mexico into U.S. inland distribution markets. That shift is increasing leasing demand for warehousing, storage and logistics facilities connected to automotive manufacturing.
At the center of many of these changes is the United States-Mexico-Canada Agreement, which introduced stricter automotive sourcing and labor rules intended to encourage more North American production. The USMCA raised regional value content thresholds for vehicles and light trucks to 75%, with some standards now increasing toward 85%. The agreement also tightened labor value content provisions, allowing automakers to count high-wage engineering, software development and research expenditures toward compliance requirements.
According to Cushman & Wakefield, those provisions are helping anchor advanced automotive engineering, EV development and software operations within the U.S., even when final vehicle assembly remains in Mexico or Canada. The report said the changes are expected to support additional demand for engineering campuses, technical centers and software hubs as automakers continue expanding advanced vehicle and electric vehicle development operations.
USMCA sourcing rules for steel and aluminum are also reshaping procurement strategies. Automakers must source 70% of steel and aluminum purchases from North America, a requirement that, when combined with Section 232 tariffs, has increased demand for domestically produced metals.
Source: GlobeSt/ALM