Supply-chain disruptions linked to the ongoing closure of the Strait of Hormuz have ensnared industrial commercial real estate pipelines as the U.S. war in Iran turns 3 months old.
The most immediate and significant impact from the conflict has been the global energy crunch precipitated by the strait’s closure, according to a new report published by CommercialCafe, a market analytics platform operated by Yardi Matrix, subsidiary of property management technology firm Yardi Systems.
About one-fifth of the world’s oil and liquified natural gas supply typically flowed through the narrow waterway at the mouth of the Persian Gulf in prewar days. Blockades that have now kinked that hose for an entire quarter have raised prices across U.S. supply chains.
Flagging a four-year high in producer price index inflation in April, the Bureau of Labor Statistics reported earlier this month that the component tracking transportation and warehousing services jumped 5% in the second month of the war compared to a 1.8% increase in March and 0.8% growth in February.
Thousands of miles away from the strait, knock-on effects of surging gasoline, jet and maritime fuel prices have created conditions in commercial real estate markets not unlike the COVID-19 pandemic, observed the CommercialCafe report’s author, Diana Sabau.
Even if the strait reopened tomorrow, the long tail of the energy crisis — from normalizing regional trade partnerships and rebuilding damaged refineries to bringing down shipping insurance premiums — will “likely accelerate the regionalization of supply chains,” Sabau noted.
As a result, “higher transportation costs will increase the value of location in the industrial real estate sector because reducing delivery distances and keeping inventory closer to customers will become a key priority,” she added.
Similar to the start of the pandemic, “site selection will likely become a primary driver of leasing decisions yet again,” Sabau believes, with units closer to seaports, railway hubs and highway networks likely to see stronger demand.
As of the end of April, Yardi Matrix data indicates that in-place rents for industrial space averaged around $9.08 per square foot, an annual increase of 5.3%. Industrial vacancies also rose year over year, climbing approximately 30 basis points to 9.1% nationwide.
With about 359.6 million square feet of industrial space actively being built across the U.S., or about 1.7% of overall stock, industrial sales totaled almost $24 billion in April. Dallas, Detroit, Atlanta and Chicago each surpassed $1 billion in overall sales volume.
Sabau pointed out that the industrial commercial real estate sector may also feel increasing pressure from consumer demand impacts of the Iran war, which are likely to intensify the longer the conflict lasts, as higher gasoline and grocery costs for households could ultimately suppress all manner of discretionary spending.
“A slowdown in consumer spending is also likely to reduce warehouse demand for distribution and fulfillment space as compared to the start-of-the-decade highs of the e-commerce expansion-driven boom in industrial leasing,” said Sabau.
A flattening in industrial property vacancies in the second half of 2025 has somewhat shifted pricing power in tenants’ direction, she also explained, marked by national spreads between new leases and in-place rents that have “narrowed in recent quarters with newly signed leases now slightly below dominating market averages in many areas.”
But regional disparities as new projects come online will determine how impactful the shift may feel in particular markets in upcoming quarters.
In Baltimore, for example, industrial vacancies of 10.8% were higher than the national figure of 9.1%, while average industrial rents of $9.26 per square foot were also above the national average of $9.08.
But the average rent for industrial space in Baltimore averaged $9.93 per square foot over the past year, while projects under construction in April were about 125% higher than year-ago levels. This signals that supply may continue to bring rent negotiations more in line with national averages.
Alternatively, industrial vacancies in Nashville, Tenn., were well below the national average at 7% in April — but so were average rents at $7.17 per square foot. Still, projects under construction were up 65% last month in Music City, which could help alleviate those tighter supply dynamics.
