In today's rapidly evolving global economy, the logistics real estate market serves as a sensitive barometer, capturing subtle shifts in trade tensions, consumer trends, and corporate strategies. On one hand, bustling e-commerce warehouses with round-the-clock activity symbolize the thriving digital economy; on the other, traditional retailers grapple with excess inventory, reflecting brick-and-mortar retail's struggles. These contrasting scenes paint a vivid picture of the market's current complexity.
Against a backdrop of rising trade protectionism, geopolitical risks, and economic slowdowns, does logistics real estate face stagnation or stand poised for growth? Prologis's latest Industrial Business Indicator (IBI) offers valuable insights into the market's underlying dynamics.
Prologis IBI: The Market's Barometer and Compass
Prologis, the global leader in logistics real estate, publishes its IBI not as mere market data but as an in-depth survey of customer storage activities and sentiment. This indicator tracks key metrics like leasing intentions, facility utilization, and expansion plans to reflect supply-demand changes and predict future trends.
The latest IBI reveals a third-quarter activity index of 53—a crucial signal marking a potential turning point. Scores above 50 indicate market expansion, while those below suggest contraction. This recovery manifests in three key areas:
- Net absorption surge: The difference between new leases and terminated leases shows growing demand for logistics space and stronger corporate expansion plans.
- Active new leasing: Increased lease signings reflect business confidence in future growth prospects.
- Healthy project pipeline: Ample development projects ensure adequate supply to meet rising demand.
Compared to 2024 averages, third-quarter metrics demonstrate stronger growth momentum, confirming the market's gradual recovery. This rebound stems from multiple interacting factors explored below.
Supply Chain Restructuring: Challenges and Opportunities
Global trade evolution profoundly impacts logistics real estate. Trade disputes, tariffs, and geopolitical risks have disrupted supply chains, prompting strategic reassessments. While initial panic buying peaked in early 2025, companies are now adapting with more flexible approaches.
Prologis Global Research Head Melinda McLaughlin identifies key demand drivers:
- Corporate adaptation to trade challenges through supply chain optimization
- Record leasing performance, particularly from e-commerce and essential industries
- Rising facility utilization nearing 85%, indicating operational expansion needs
- Favorable market conditions with adjusted rents and limited new supply
The "Just-in-Case" Inventory Strategy: Temporary or Permanent?
Companies continue maintaining lean inventories through "just-in-case" strategies, where any unexpected consumption spike could trigger rapid supply chain reactions. McLaughlin views this as cyclical rather than structural—businesses may rebuild buffers as economic conditions improve to mitigate persistent supply chain risks.
Market Equilibrium: Vacancy Rates Versus Supply
The report anticipates stable vacancy rates around 7%, with declining construction starts potentially tightening future supply. As new projects decrease, premium logistics facilities may become scarce, potentially accelerating rent growth.
Conclusion: Cautious Optimism for Logistics Real Estate
The Prologis IBI signals a positive inflection point for logistics demand despite ongoing uncertainties. Key takeaways include:
- Third-quarter metrics indicate market recovery
- Large enterprises and essential sectors lead growth
- Inventory strategies reflect current economic caution
- Stable short-term vacancies mask potential long-term supply constraints
Future trends may include:
- Increased automation and smart technology adoption
- Greater emphasis on sustainable development
- Diversified service offerings beyond traditional warehousing
- Regional market differentiation
- Enhanced risk management frameworks
As the logistics real estate market navigates this transformative period, stakeholders must remain agile, leveraging data-driven insights to capitalize on emerging opportunities while mitigating risks.