The unpredictable currents of global trade are quietly directing the logistics real estate market, with demand showing signs of a turning point after months of cautious observation. Recent data from industry giant Prologis reveals noteworthy trends in its Industrial Business Indicator (IBI), offering insights into the sector's future trajectory.
IBI Index: The Pulse of Logistics Real Estate
Prologis defines the IBI as a survey tracking customer warehouse activities and sentiment—essentially serving as the industry's barometer. The Q3 IBI activity index reached 53, indicating overall market expansion. Key metrics including net absorption, new lease signings, and project pipelines all surpassed 2024 averages, signaling positive momentum.
However, Prologis notes that supply chain activity peaked in early 2025 before moderating due to trade volatility, suggesting a non-linear recovery pattern. Large corporations and e-commerce firms currently lead the growth, with other industries expected to follow.
Drivers Behind the Demand Recovery
Prologis Global Research Head Melinda McLaughlin identifies several critical factors fueling the resurgence:
- Corporate Adaptation to Trade Uncertainty: Businesses continue structural supply chain investments despite trade friction, focusing on operational needs rather than market noise.
- Record Leasing Activity: Prologis achieved historic leasing volumes in Q3, particularly from essential industries like food/beverage, e-commerce, and healthcare.
- Improved Space Utilization: Rising warehouse occupancy rates reflect strengthening operational efficiency and preparation for future expansion.
- Favorable Market Conditions: Moderate rent adjustments and reduced new project deliveries create advantageous leasing opportunities.
The "Just Right" Inventory Approach
Businesses are increasingly adopting lean inventory strategies, maintaining lower average utilization rather than stockpiling. McLaughlin views this as cyclical rather than structural: "Current economic uncertainty drives cautious inventory management. As conditions improve, we anticipate buffer stock rebuilding—especially given persistent supply chain disruptions."
Market Outlook: Stability with Emerging Opportunities
Prologis projects stable vacancy rates near 7%, with construction starts remaining below pre-pandemic (2017-2019) averages. "The development pipeline is tightening rapidly," McLaughlin notes. "With speculative building significantly slowed, modern facilities in prime locations will become scarce. High replacement costs suggest imminent rent acceleration as demand improves."
Balancing Challenges and Opportunities
The IBI data reveals a market at an inflection point—businesses are adapting to trade uncertainties while supply constraints create future pricing potential. Key considerations include:
- Challenges: Navigating trade volatility while meeting demands for operational flexibility
- Opportunities: Capitalizing on recovering demand and constrained supply to enhance returns
Future Trends Shaping the Sector
Several transformative developments are redefining logistics real estate:
- Technology Integration: AI and IoT enable smarter warehouses and automated transportation
- Sustainability Focus: Solar power and water conservation systems reduce environmental impact
- Service Diversification: Value-added offerings like supply chain financing enhance client retention
Strategic Considerations for Investors
While logistics real estate remains attractive, prudent evaluation is essential:
- Prioritize economically vibrant regions with strong transportation networks
- Target modern facilities in strategic locations to attract premium tenants
- Monitor technological and sustainability trends aligning with future demand
The sector's long-term fundamentals remain strong, though investors must weigh economic cyclicality, policy changes, and intensifying competition. As e-commerce growth continues reshaping supply chain needs, logistics real estate stands poised for evolution—demanding innovation from industry participants to maintain competitive advantage.