In an era marked by both challenges and opportunities, the industrial real estate market navigates uncertain waters like an ocean liner seeking its course. What instrument charts this vessel's path through the fog of economic uncertainty? The answer lies within Prologis' latest Industrial Business Indicator (IBI) report.
This meticulously crafted document from the global logistics real estate leader serves as a guiding star for market participants. More than mere statistics, the IBI represents a profound analysis of warehouse customer activity, a precise measurement of market vitality, and an insightful forecast of emerging trends.
The Industry Leader: Prologis
Before examining the IBI findings, we must first understand the organization behind it. Prologis stands as the world's largest industrial real estate investment trust, with an expansive portfolio spanning major global markets. The company has established itself not merely as a provider of logistics facilities, but as an innovator in supply chain solutions and a strategic partner for business growth.
Prologis' industry leadership stems from its deep market understanding, precise customer insight, and relentless pursuit of operational excellence. Its reputation has attracted partnerships with numerous global enterprises seeking to optimize their supply chain operations.
IBI Index: Clear Signals of Market Transition
The core of the IBI report lies in its proprietary index—a deceptively simple number containing significant market intelligence. Functioning as an economic barometer, the IBI accurately reflects fluctuations in market demand.
The third quarter IBI activity index reached 53, signaling a critical inflection point toward recovery. Compared to 2024 averages, net absorption, new lease signings, and project pipelines all demonstrated healthier performance, collectively supporting the demand rebound.
However, the report maintains measured optimism, noting that supply chain activity peaked in early 2025 before moderating due to trade volatility. This nuanced perspective reflects Prologis' sophisticated market understanding and risk awareness.
Key Demand Drivers: A Prologis Perspective
Melinda McLaughlin, Prologis Global Head of Research, provides expert analysis of the fundamental demand catalysts:
Strategic Investment: "Companies are moving beyond trade policy noise to make structural supply chain investments supporting business growth," McLaughlin observes. Record leasing activity and build-to-suit agreements in Q3, particularly from large customers in e-commerce, food & beverage, and healthcare sectors, demonstrate this commitment.
Utilization Growth: Expansion within existing facilities shows improving operational health. Utilization rates climbed to 84% in Q3, approaching 85% by October, as inventory drawdowns created capacity for new production.
Market Conditions: Moderate rent adjustments and reduced new deliveries have created favorable leasing opportunities, prompting customers to secure premium spaces before supply tightens further.
The "Just Enough" Inventory Strategy
The report identifies an important market nuance—customers continue favoring lean inventory strategies with lower average utilization, diverging from traditional expansion approaches. This conservative posture means any unexpected consumption growth could trigger significant supply chain reactions.
McLaughlin interprets this as cyclical rather than structural: "Current economic uncertainty and elevated carrying costs promote inventory caution. As the cycle turns toward expansion, we anticipate companies rebuilding buffer stocks, particularly given persistent supply chain disruptions."
Vacancy Rates: Short-Term Stability, Long-Term Pressure
The IBI projects near-term vacancy rates stabilizing around 7%, reflecting market equilibrium. However, construction pipelines continue shrinking, with new starts below 2017-2019 averages.
"Recent deliveries continue leasing up, supporting stable vacancies, but the development pipeline is tightening rapidly," McLaughlin explains. "With starts well below pre-pandemic levels and speculative construction slowing significantly, modern facilities in prime locations will face renewed scarcity. High replacement costs suggest accelerating rent growth as demand improves and quality space becomes limited."
Strategic Implications
The IBI report suggests several strategic considerations for market participants:
• Monitor macroeconomic conditions and trade policy developments that could impact industrial real estate fundamentals
• Optimize supply chain management and inventory strategies to balance efficiency with resilience
• Evaluate technological applications that enhance logistics operations, from IoT monitoring to AI-driven optimization
• Maintain operational flexibility to adapt to evolving market conditions
As the industrial real estate market enters this recovery phase, the Prologis IBI report provides invaluable intelligence for navigating the transition. Its combination of empirical data and expert analysis offers market participants a comprehensive framework for strategic decision-making in the evolving logistics landscape.