As global trade tensions gradually ease, businesses are reshaping their supply chains, bringing the logistics real estate market to a critical inflection point. The latest Industrial Business Indicator (IBI) report from Prologis, the global leader in logistics real estate, provides deep insights into the subtle yet profound transformations occurring in the sector.
IBI Index: Leading Indicator of Demand Recovery Shows Improving Market Sentiment
Prologis defines the IBI as a key metric measuring customer confidence in warehouse activities. The Q3 data shows the IBI activity index reached 53, signaling significant improvement in market sentiment. This growth stems from notable increases in net absorption, new lease signings, and project pipelines—all exceeding 2024 averages.
While supply chain activity peaked in early 2025 before moderating due to trade volatility, the recovery process demonstrates complex dynamics rather than linear progression. Large enterprises and e-commerce companies are leading this revival, with other industries expected to follow as confidence strengthens.
Key Drivers of Demand Recovery
Prologis Global Research Head Melinda McLaughlin identifies multiple factors converging to stimulate market growth:
- Strategic response to trade challenges: Businesses are making structural supply chain investments to enhance efficiency and resilience
- Industry leadership: Food & beverage, e-commerce, and healthcare sectors are driving record leasing activity
- Improved utilization: Expansion within existing facilities indicates healthy operations with utilization rates approaching 85%
- Favorable market conditions: Moderate rent adjustments and reduced new deliveries create attractive conditions for tenants
"Just-in-Case" Inventory Strategy Prevails
While utilization rates continue rising, companies maintain conservative "just-in-case" inventory approaches, with average utilization below traditional expansion periods. This cautious stance reflects ongoing economic uncertainties and high carrying costs, though it leaves supply chains vulnerable to sudden demand surges.
Cyclical Versus Structural Trends
McLaughlin characterizes the current demand recovery as primarily cyclical rather than structural: "As the cycle shifts toward expansion, we anticipate inventory buffers will rebuild, particularly given persistent supply chain disruptions."
Market Outlook: Tightening Conditions and Potential Rent Acceleration
The report forecasts stable vacancy rates around 7% in the near term, with construction pipelines contracting significantly—new starts remain below 2017-2019 averages. McLaughlin notes: "As new supply gets absorbed, particularly for modern, well-located facilities, and with construction costs elevated, we expect rent growth may accelerate again."
Conclusion: Navigating Opportunities in a Transforming Market
The Prologis IBI report reveals a logistics real estate market at a delicate turning point. While challenges persist, strategic adaptation and technological innovation present significant opportunities for market participants. The convergence of cyclical recovery, supply chain restructuring, and technological advancement is reshaping industry fundamentals, requiring nimble responses from investors and occupiers alike.