Business leaders facing supply chain challenges and warehouse space constraints may find answers in the latest Industrial Business Indicator (IBI) from Prologis, which reveals significant market shifts in the third quarter of 2024.
Market Activity Shows Promising Rebound
The IBI activity index reached 53 in Q3, indicating accelerating market momentum after a period of uncertainty. Key metrics demonstrate this recovery:
- Net absorption shows robust demand for new logistics space
- New leasing activity reflects growing business confidence
- Project pipeline remains healthy despite construction slowdowns
These improvements suggest the industrial real estate sector may be emerging from its recent downturn, presenting strategic opportunities for expansion-minded companies.
Large Enterprises Lead Recovery
Despite ongoing trade volatility, the market demonstrates remarkable resilience, with major corporations and e-commerce firms driving the rebound. Prologis Global Research Head Melinda McLaughlin attributes this to:
- Proactive responses to trade uncertainties
- Record leasing volumes from key industries
- Improved facility utilization rates
Notably, food/beverage, e-commerce, and healthcare sectors accounted for most new leasing activity, signaling continued strong demand from these industries.
Inventory Strategies Evolve
Warehouse utilization averaged 84% in Q3, approaching 85% by October, as companies implement "right-sized" inventory approaches. This lean strategy offers:
- Reduced carrying costs
- Improved supply chain agility
- Faster response to demand fluctuations
McLaughlin suggests this represents a cyclical adjustment rather than permanent structural change, with inventory rebuilding likely during economic expansions.
Market Fundamentals Stabilize
Vacancy rates are expected to stabilize around 7%, reflecting balanced market conditions. Construction starts remain below pre-pandemic levels, potentially tightening supply for modern, well-located facilities in coming quarters.
"As new supply gets absorbed and construction slows, we could see renewed rental growth pressure," McLaughlin noted, particularly for premium logistics properties.