Market Confidence Rebounds
The IBI index, a key measure of warehouse activity sentiment, rose to 53 in Q3, signaling a recovery from earlier lows. This uptick reflects stronger net absorption, new lease signings, and project pipelines—all exceeding 2024 averages. While supply chain activity moderated after peaking in early 2025 due to trade volatility, the recovery trajectory remains uneven, with large enterprises and e-commerce leaders driving initial momentum before broader sector participation.
Strategic Pivots: Navigating Uncertainty
Faced with trade uncertainties, corporations are proactively restructuring supply chains. "Businesses aren’t waiting for clarity—they’re creating it," noted Melinda McLaughlin, Prologis’ Global Head of Research. Q3 saw record leasing activity and customized construction agreements, particularly in food & beverage, e-commerce, and healthcare sectors. "Flexible, efficient logistics infrastructure is now a competitive imperative," she added.
Operational Efficiency Gains
Warehouse utilization rates climbed to 84% in Q3, nearing 85% by October, as companies optimized existing footprints. "Lean operations dominate," McLaughlin observed. "Businesses are balancing demand fulfillment with cost containment through layout optimization and advanced technologies."
Market Opportunities Emerge
Rent adjustments and slowing new supply present favorable conditions for tenants. "This is an opportune window to secure premium facilities at competitive terms," McLaughlin emphasized, noting that proactive players gain strategic advantages in location selection and lease flexibility.
The "Just-in-Case" Inventory Paradox
Companies maintain lean inventories despite supply chain risks—a tactical response to high carrying costs rather than a permanent shift. McLaughlin anticipates buffer rebuilding during economic expansion, particularly as disruptions persist. "Current inventory discipline reflects cyclical pragmatism, not structural change," she explained.
Supply-Demand Dynamics
Vacancy rates are stabilizing near 7%, while construction starts lag pre-pandemic levels. With speculative development slowing, McLaughlin projects tightening conditions for modern, well-located facilities. "When demand rebounds, replacement cost pressures could accelerate rent growth," she cautioned.
Conclusion: Preparing for the Next Growth Phase
The logistics real estate market demonstrates resilience through strategic adaptation. As corporate tenants refine supply chain architectures and developers exercise construction discipline, the sector appears poised for renewed expansion. For investors and occupiers alike, understanding these evolving dynamics will be critical to capitalizing on the market’s next chapter.