Behind every online purchase and retail transaction lies an often-overlooked infrastructure that makes modern commerce possible: logistics real estate. These warehouses, distribution centers, and sorting facilities form the backbone of e-commerce, retail, and manufacturing operations.
Prologis IBI Index: The Vital Signs of Logistics Real Estate
The Prologis IBI Index serves as a comprehensive health check for the logistics real estate market. Developed by the global logistics real estate leader, this index tracks three critical metrics:
- Net Absorption: Measures the difference between newly leased and vacated warehouse space, indicating market demand.
- New Lease Signings: Tracks the total area covered by new warehouse rental contracts, reflecting market activity.
- Development Pipeline: Monitors planned or under-construction projects, signaling future supply.
Q3 2025: A Turning Point for Market Recovery
The latest Prologis report reveals an IBI Activity Index of 53 for Q3 2025, signaling a positive shift in logistics real estate demand. Compared to 2024 levels, all key indicators show healthier growth patterns, suggesting market stabilization after recent adjustments.
This recovery, while promising, remains uneven. Large corporations and e-commerce giants are leading the charge, with other industries expected to follow suit gradually.
Drivers of Market Recovery
Prologis Global Research Head Melinda McLaughlin identifies several factors contributing to this resurgence:
- Businesses are moving from cautious observation to proactive expansion to support growth and supply chain investments.
- Improved warehouse utilization rates indicate efficient operations and inventory movement through supply chains.
- Favorable market conditions, including adjusted rental rates and reduced new supply, are creating attractive opportunities.
The "Just Enough" Inventory Strategy
Businesses continue to adopt lean inventory approaches in response to economic uncertainty and high holding costs. While this cautious strategy minimizes financial risk, it leaves supply chains vulnerable to sudden demand spikes.
McLaughlin views this as a cyclical rather than structural trend: "As economic conditions improve, we anticipate businesses will rebuild inventory buffers, particularly given ongoing supply chain challenges."
Vacancy Rates: Short-Term Stability, Long-Term Pressure
The report forecasts stable vacancy rates around 7% in the near term, with construction starts remaining below pre-pandemic levels. However, McLaughlin warns of future tightening: "As demand recovers and new supply dwindles, we expect vacancy rates to decline and rental growth to accelerate, particularly for modern, well-located facilities."
Emerging Trends in Logistics Real Estate
Beyond current market conditions, several transformative trends are shaping the future of logistics real estate:
- Smart Warehousing: Integration of AI and IoT technologies for automated operations.
- Sustainable Development: Implementation of eco-friendly solutions like solar power and water recycling.
- Customized Facilities: Tailored spaces designed for specific business needs.
- Multifunctional Spaces: Hybrid facilities combining storage, distribution, and office functions.
Impact on Everyday Life
While logistics real estate might seem distant from daily life, its evolution directly affects consumers through:
- Faster delivery times for online purchases
- Potential cost reductions in consumer goods
- Expanded employment opportunities in logistics sectors