Some tree squirrels build nests in hollowed-out portions of trees, while others build leaf nests on tree branches. Dens built in hollowed-out trees provide better protection from the elements.
Leaf nests are built using a foundation of twigs that are woven together and covered with leaves and moss. These nests are typically located where branches meet a tree's trunk or where an intersection of branches provides better balance and support for the nest, according to West Virginia Wildlife Magazine.
Nests built in hollowed out tree trunks are used as nursery nests for squirrels giving birth to babies, and they are also used for better protection during the cold winter months. In urban areas, squirrels may skip building nests in trees and head for the warmth of buildings, which can lead to significant damage in attics and electrical wiring systems.