REAL ESTATE NEWS

Rising power costs are starting to do what rent growth alone could not: force U.S. warehouse investors to rethink which assets can actually hold their margins. Even as headline rents cool from the post-2020 surge, the latest data from Cushman & Wakefield's Waypoint report shows electricity prices in the Americas jumping 8.3% in a single year, turning the utility line item into a swing factor in industrial underwriting.

Rents Ease, But Not Enough To Offset Power

On the surface, the U.S. story looks familiar: after several years of sharp increases, logistics rents are now in a clear phase of moderation. Globally, warehouse rents sit about 36% above 2020 levels, but momentum has cooled, with almost a quarter of tracked markets posting rent declines in 2025 and another 15% flat. In North America, that shows up as "broadly stable" average rents across the U.S. and Canada, even though conditions vary widely by market.

In the U.S., parts of the South still notched healthy rent gains last year, while several mature coastal markets—Inland Empire, New Jersey, Phoenix and Los Angeles among them—saw rising vacancy and softer demand push rents lower.

Overall, the U.S. still sits in the global middle band, with many markets clustered in the $5 to $10 per square foot per year range, and roughly half of all Americas markets in that bracket.

At the top of the spectrum, the New York City outer boroughs and San Jose remain among the priciest logistics locations in the world, joined by Northern New Jersey, Los Angeles and Vancouver. Memphis is at the opposite end, now the most cost-competitive U.S. market as rents fell alongside record vacancy and weak net absorption.

For tenants, that rent plateau offers some breathing room. For investors, it means future returns are less likely to be driven purely by rate growth and more by how operating costs behave market by market.

Labor Stays Expensive, Not Explosive

Labor is the second leg of that equation. On Cushman & Wakefield's index, the Americas sit at 121 against a global median of 100, putting U.S. and Canadian wage levels comfortably above both APAC and EMEA. All North American locations are above the global average, with East and West Coast markets carrying some of the highest warehouse and production wages in the sample.

The growth curve, however, has flattened. Wages in the U.S. and Canada are now rising at about 1% to 2.5% annually, a far cry from the spikes seen earlier in the cycle. That deceleration comes off an elevated base built during a prolonged period of labor shortages, meaning costs are high but not spiraling.

Across the Americas, the pressure is actually more pronounced in Latin America, where inflation has driven much faster nominal wage gains—around 35% in Buenos Aires—even though absolute pay levels remain far below those in North America.

The composition of wage growth also matters. In all regions, the largest increases are showing up in skilled roles—warehouse managers and supervisors, maintenance mechanics, truck drivers and forklift operators—where shortages remain acute.

Pay for warehouse associates, who are most exposed to automation, has been flat to negative in parts of APAC and EMEA and only marginally higher in the Americas. For investors, the message is that payroll pressure will stay concentrated in the skilled segment of the workforce rather than across the entire headcount.

Power Moves The Needle

The real change in the cost stack is coming from the power meter. Between 2024 and 2025, business electricity rates in the Americas rose by an average of 8.3%, the strongest jump of any region, even as the global average dipped slightly. Chile, Canada and Brazil posted double-digit increases of 13% to 20%, but the U.S. is also feeling the impact as data centers, automated warehouses and cold storage facilities drive up demand for reliable, high-capacity power.

Despite that increase, the Americas still enjoy structurally lower electricity rates than most European markets, largely because of access to natural gas. But direction matters more than level when tenants are building multi-year operating budgets. Automation, electrified trucking and expanded cold chains all push kilowatt-hour usage higher, so an 8.3% move in pricing bites harder than it would have in a less power-intensive era.

Cushman & Wakefield's research notes that electricity cost and reliability have moved to the forefront of site selection decisions, alongside labor availability and proximity to customers. Occupiers are favoring more efficient buildings and locations where they can tap renewable energy, negotiate competitive tariffs or install on-site generation such as rooftop solar and battery storage. That shift favors modern assets with robust electrical capacity, clear paths to upgrades and the physical characteristics needed to accommodate solar, storage and potentially higher-amp equipment.

What This Means Underwriting

The combined result is a cost structure in which rent is no longer the only or even the primary lever tenants can pull to defend margins. Across the Americas, logistics rents rose about 2.8% between 2024 and 2025, while electricity costs advanced three times as fast and wages kept grinding higher from already elevated levels. In the near term, many U.S. markets still lean in tenants' favor, but survey respondents expect that to flip: by 2029, landlord-favorable markets in the Americas are projected to rise from 17% to 46%, while tenant-favorable markets are projected to shrink from 53% to 19%.

For investors, that combination—moderating rents, rising power prices and a forecast tilt back toward landlords—points to a different way of thinking about "cheap" and "expensive" markets. Some Midwestern and Southern metros that marry moderate rents with relatively lower electricity costs and more accessible labor may offer a more sustainable total-cost advantage for occupiers, deepening the pool of tenants able to pay. High-rent coastal locations facing both expensive power and tight, skilled labor will likely need highly efficient, energy- and automation-ready buildings to justify further rent growth.

The throughline in the new math is simple: as electricity prices reset higher across the Americas, the industrial assets that hold their value will be the ones that help users control what they spend on power, not just what they pay in rent.

Source: GlobeSt/ALM