Engineering News-Record reports that AI data center demand is reshaping a rebounding US industrial construction market.

The number of speculative U.S. industrial buildings larger than 1 million sq ft under construction nearly doubled in three months, according to JLL's latest Industrial Market Dynamics report, released Oct. 20.

The Chicago-based global commercial real estate and investment management firm tracks development, leasing and occupancy across the U.S. industrial market. Its third-quarter report examines a national inventory of 16.3 billion sq ft, including projects under construction and activity across different building sizes and types.

**Custom Projects Gain Ground**

Build-to-suit and owner-user industrial construction totals 100.1 million sq ft, or 32.4% of the U.S. industrial construction pipeline, according to JLL Research. The five-year average share for that category is 26.8%.

JLL counted 33 speculative buildings of at least 1 million sq ft under construction, up from 18 in the second quarter of 2026. Overall, JLL found 317 million sq ft of industrial space under construction, up 28.7% from a year earlier and 14.8% from the previous quarter. That is the highest level since early 2024.

The surge comes as traditional logistics demand is joined by growth in advanced manufacturing and the data center supply chain, creating demand for larger, more power-intensive and technologically sophisticated industrial facilities.

"I think it is certainly a recovery," says Elizabeth Holder, research manager on JLL's national industrial research team and the report's co-author. Unlike the pandemic-era building cycle, however, she says developers are taking a more disciplined approach, weighing market fundamentals and the needs of different users and building sizes.

What is being built is also changing as automation, artificial intelligence and the data center supply chain bring new users into the industrial market. "I do think it's new and different," Holder says.

Traditional demand remains important as well. JLL's research found companies consolidating multiple distribution facilities into single regional hubs, while third-party logistics providers accounted for nearly 18% of third-quarter leasing volume. Holder says manufacturers and the data center supply chain are increasingly among the industries using those logistics providers.

The report also shows the tenant mix changing. Construction materials and building fixtures accounted for 14.7% of leasing volume, up from 10.8% a year earlier. JLL researchers say some of that shift reflects equipment suppliers, construction vendors and power infrastructure companies establishing distribution hubs near hyperscale data center projects.

JLL cannot yet quantify how much national industrial demand is tied to data centers. Holder says the firm only recently began identifying such leases, although it is seeing the activity increase, particularly in Dallas-Fort Worth, Columbus, Ohio, and the Washington, D.C.-Baltimore region.

**Big Boxes Get Bigger**

Construction accelerated most sharply among larger industrial buildings in the third quarter. Speculative buildings under construction changed from the second quarter to the third quarter of 2026 as follows, according to JLL Research:

- More than 1 million sq ft: 18 to 33 (+83%)

- 750,000 to 999,999 sq ft: 11 to 18 (+64%)

- 500,000 to 749,999 sq ft: 23 to 40 (+74%)

- 250,000 to 499,999 sq ft: 121 to 141 (+17%)

- 100,000 to 249,999 sq ft: 370 to 424 (+15%)

- Under 100,000 sq ft: 277 to 244 (−12%)

**Financing, Delivery and Risk Allocation**

Trammell Crow Co., a major U.S. industrial developer, is seeing significant demand in the Houston region from advanced manufacturers producing components and equipment that support data center development, Managing Director Jeremy Garner told ENR.

"Power has emerged as the single most important requirement and differentiator for new industrial developments targeting advanced manufacturing occupiers," Garner says. "Other common requirements include climate-controlled space, extra-wide dock doors, larger drive-in ramps, crane capability, and, for select users, paved outdoor storage for raw materials and finished goods." Those occupiers typically seek 300,000 sq ft to 1 million sq ft, larger than traditional warehouse users, he added.

Holder noted that older Class B warehouses often lack the clearance heights and column spacing needed for automated storage and retrieval systems. Newer buildings also provide more robust electrical capacity because automated systems themselves can consume substantial power.

"Every broker that I speak to, it's like, 'Do you have power? How soon can it be available?'" Holder says. "And that's like the number one criteria that the tenants are looking at that specifically already know how much they need."

Obtaining that capacity can take years in some markets, she says, giving sites where adequate power already exists, or can be added quickly, a competitive advantage. Garner says power and skilled labor increasingly drive site selection for advanced manufacturers, while highway access matters less than it does for traditional warehouse users.

**AI Demand Finds a Home in Spec Space**

Trammell Crow Co.'s Blue Ridge Commerce Center in southwest Houston illustrates how this shift can play out.

Applied Optoelectronics Inc., which makes optical networking equipment used in AI data centers, leased the entire 153,928-sq-ft Building 3 at the development in February and exercised an option to buy it for $26.8 million in September, according to a Trammell Crow Co. news release.

AOI is undertaking a $9-million interior buildout covering 72,610 sq ft of the building, according to Texas Department of Licensing and Regulation records. The company also announced plans this year to add approximately 388,000 sq ft of manufacturing capacity in two Pearland, Texas, buildings. In announcing the expansion, AOI CEO Thompson Lin said demand for optical connectivity in data centers had exceeded the company's expectations.

"In the Houston region alone, Trammell Crow Co. has successfully negotiated leases and sale agreements that adapt speculative industrial buildings to meet the specialized requirements of advanced manufacturing companies," Garner said. "Examples include Blue Ridge Commerce Center, Weiser Business Park and Carpenters Logistics Center, where occupiers manufacture a range of products, including cabling, electrical components, backup power-generation equipment, semiconductors and customized data-center racking."

**More Users Build for Themselves**

Even as speculative construction of mega-boxes surges, build-to-suit and owner-user projects are taking a larger share of the market. Holder says some users know precisely where they need to locate but cannot find existing space that meets their requirements.

"They have the location down to a science. But there's just nothing available ... in that size segment or in that requirement," she says. "And coupled with that, they also might have highly specialized ... needs of their building."

Light manufacturers, for example, may need thicker floor slabs to support heavier loads.

For now, Holder says JLL sees little evidence of broad overbuilding. Year-to-date absorption has already surpassed the total for 2025, and leasing through the third quarter was about 98% of last year's full-year volume. She expects development to keep growing moderately rather than return to the breakneck pace of the pandemic period.

"I think we're going to see more ... sophisticated warehouses," she says. "Overall, I think we're going to see a little bit taller building, more efficient building."