How Trucking Affects Industrial
Welcome to the Real Estate Espresso Podcast, your morning shot at what’s new in the world of real estate investing. I’m your host, Victor Menasce. Today’s show is a listener question. But first, I’d like to invite you to consider investments that are boring but predictable. That’s how we think about industrial storage. The Y Street Capital Storage Fund is heavily focused on this segment, while at the same time offering diversification.
This is for accredited investors only residing in the US in compliance with SEC regulations. To learn more, visit ystreetcapital.com and register for our investor portal. Of course, any investment would be by prospectus only and in compliance with SEC regulations.
Today is another AMA episode, that is, “Ask Me Anything.” I do love to answer your questions. And this question comes from Tony, who writes, “I’m hearing and seeing that there is excess capacity in the trucking industry. Freight rates are below profitable levels for many companies. How will this translate into demand for industrial real estate?”
Well Tony, this is a great question. We’re going to connect two markets that talk to each other every day: the US trucking industry and industrial real estate.
Over the past couple of years, trucking has been working through a very classic post-pandemic boom-and-bust hangover. Capacity expanded aggressively during the pandemic. New carriers entered the market, fleets added trucks and trailers, pricing power shifted to the carriers. Then demand normalized, goods consumption cooled, and the industry was left with too many trucks chasing too few deliveries.
That excess capacity drove a prolonged down cycle in rates and profitability, pushing many smaller operators to exit the market. Even now, we’re still seeing a mixed picture. Freight volumes remain soft. The market is showing pockets of tightening, often driven by weather, seasonality, and other capacity leaving the system.
Here’s a couple of data points that frame it. There is the Cass Freight Index for shipments, and it showed a sharp year-over-year decline in 2025, down about a percent, while expenditures were only modestly lower year over year, implying higher per-shipment cost even amid weak volumes.
The second one is, we reported a notable surge in spot truckload rates in December, again consistent with temporary tightening more than a robust demand recovery.
So what does that mean for industrial real estate? Trucking is absolutely the last‑mile infrastructure for industrial property. Industrial real estate, of course, is not just one market, it’s a network of functions. There is port‑adjacent, transload, regional distribution, last‑mile delivery, manufacturing support, cold storage, contractor and service yards. There’s long‑haul trucking. Trucking is the connective tissue across all of them.
And when trucking is over‑capacity and under‑earning, you start to see second‑order effects showing up in occupancy, rent growth, and tenant credit quality across specific industrial segments. So let’s break down the impact.
If the carriers are in distress, it changes where demand shows up, meaning what kind of space is needed. When rates are depressed and margins are thin, carriers rationalize. They consolidate terminals, they reduce drop‑yard footprints, and they push maintenance and admin functions into fewer locations. That can reduce demand for certain types of industrial real estate, especially older, functionally obsolete terminals with low‑clearance warehouses, and these end up getting used as quasi‑open space.
At the same time, distress can increase demand for cheaper industrial configurations, specifically outdoor storage, drop lots, trailer parking, and flex space that supports repair and light maintenance, because these are cost‑controlled ways to operate. In other words, the mix is going to shift. There’s going to be less really nice warehouse and more utilitarian logistics infrastructure.
Excess capacity can also mask weak freight demand, which still supports certain warehouse nodes. This is the nuance that most investors miss. You can have weak freight volumes and still have busy warehouses. Why? Because shippers redesign their networks, they reposition inventory, and they optimize transportation procurement.
A down cycle in trucking often encourages shippers to run more distributed networks because transportation is temporarily cheaper and more available. So, in an excess‑capacity environment, you might see more short‑haul and regional replenishment strategies. You might see greater willingness to place inventory closer to demand centers. And you might see higher velocity through certain distribution buildings even if the total volume is flat.
But it’s not uniform. Softer freight demand tends to hit discretionary goods, so markets tied to those flows will feel it sooner.
Next, we tend to see tenant credit risk rising, especially your transportation companies. That’s both trucking companies, brokers, and last‑mile operators. And while the trucking market is oversupplied, the weakest balance sheets tend to crack first. We’ve seen widespread decreases in, thus far, attempting to get small carriers to exit the market, as well as discussions of continued tightening as capacity leaves the system.
For landlords, that shows up as higher rollover risk at renewal, greater rent sensitivity and requests for rent concessions. More subleasing and “give back space” behavior is going to be prevalent in the market. Higher default risk is also a factor.
When trucking is oversupplied, the carriers cannot afford inefficiency. Trailer turns, dwell time, throughput, these all matter more. That increases, I will use truck power as an example, trailer delivery is the premium on properties that have strong truck courts and circulation, that have decent trailer storage capacity or permitted, proximity to interstates and ports, as well as permitted outdoor storage and longer operating hours. And that’s one of the reasons why industrial outdoor storage and yard‑intensive facilities have had structural…
And a final point, trucking markets tend to turn faster than industrial development cycles. If capacity continues to exit, pricing power can return to the carriers even without explosive demand growth. Once trucking tightens, shippers pay more to move freight, and many respond by changing their network design. They are going to spend less money on expediting; they are going to hold more inventory.
So what should investors do? How do you respond to this? Well, there’s three practical takeaways.
Number one, segment your industrial. Transportation tenants are not the same as manufacturing, so you go to the freight indicators. Leading indicators of industrial leasing, Cass shipment trends for volume, and DAT spot rates for tightness, tender rejections for capacity balance can help you anticipate when tenants will be expanding or shrinking.
So I want to thank you, Tony, for a fabulous question. Unfortunately, it’s not a simple answer because the market segments in so many different ways, including geographically. As you think about that, have an awesome rest of your day, go make some great things happen, and we’ll talk to you again tomorrow.
Stay connected and discover more about my work in real estate and by visiting and following me on various platforms:
Real Estate Espresso Podcast:
- 🎧 Spotify: The Real Estate Espresso Podcast
- 🌐 Website: www.victorjm.com
- 💼 LinkedIn: Victor Menasce
- 📺 YouTube: The Real Estate Espresso Podcast
- 📘 Facebook: www.facebook.com/realestateespresso
- 📧 Email: podcast@victorjm.com
Y Street Capital:
- 🌐 Website: www.ystreetcapital.com
- 📘 Facebook: www.facebook.com/YStreetCapital
- 📸 Instagram: @ystreetcapital
