Is your warehouse vacancy rate still hovering at high levels? Are you still struggling to find quality tenants? New data suggests the logistics real estate market may finally be turning a corner.
The latest ProLogis Industrial Business Indicator (IBI) report offers promising signals for the sector. The IBI Activity Index reached 53 in the third quarter, indicating that demand for logistics properties is bottoming out and showing positive signs of recovery.
Compared to 2024 averages, key metrics including net absorption, new lease signings, and construction project pipelines all demonstrate healthier growth patterns. This suggests vacant spaces are being gradually absorbed while new leasing demand emerges, prompting developers to plan future projects more actively.
A Gradual Recovery Pattern
The IBI index's rebound didn't occur overnight but followed complex market adjustments. The report notes that supply chain activity peaked in early 2025 before moderating due to trade fluctuations. Consequently, the current recovery isn't following linear growth but rather a wave-like progression.
Large corporations and e-commerce giants are leading this growth wave, with other business types expected to follow gradually. This pattern suggests the recovery will gain broader momentum across different industry segments.
Key Drivers of Demand Recovery
Several factors are contributing to renewed demand in logistics real estate:
- Continued E-commerce Expansion: While growth rates have moderated, online retail remains a primary driver for warehouse demand. E-commerce companies require extensive storage and distribution facilities to meet growing consumer expectations for fast delivery.
- Supply Chain Diversification: Global supply chain restructuring has made resilience and diversification top priorities for businesses. Many companies now seek additional warehouse space to maintain distributed inventory networks that can withstand disruptions.
- Manufacturing Reshoring: National policies encouraging domestic manufacturing are creating new demand for industrial space. Manufacturers require storage for raw materials, work-in-progress inventory, and finished goods throughout production cycles.
Persisting Market Challenges
Despite positive indicators, the logistics real estate sector still faces obstacles. Rising interest rates may increase developers' financing costs, potentially slowing new project launches. Additionally, labor shortages and limited land availability in key markets could constrain growth potential.
The ProLogis IBI data suggests the logistics property market has reached a critical inflection point. While the recovery path may encounter fluctuations, fundamental trends including e-commerce growth, supply chain restructuring, and manufacturing shifts point toward sustained opportunities. For investors and developers, this represents a pivotal moment to reassess strategies and position for emerging demand.