Prologis Forecasts New Industrial Real Estate Cycle For 2026

A new industrial real estate cycle is expected to begin in 2026, according to a report released by Prologis Research.

The firm noted that while rental demand was weak in the first half of 2025, conditions improved in the latter half of the year as trade uncertainties eased and companies shifted their focus back to long-term supply chain strategies.

“Softness in early 2025 gave way to renewed activity from large users and e-commerce operators once trade policies fell into a narrower band of potential outcomes,” the report stated.

Global industrial rents declined 3.7% last year, reflecting broad-based weakness. Average rents fell 2.3% in the first half of 2025 but moderated to a 1.4% decline in the second half, signaling stabilization. Prologis described this period as a critical transition for occupiers, operators, investors and developers as planning for 2026 accelerates.

Demand in 2025 was driven primarily by consumption-focused and e-commerce-related companies, while manufacturing activity remained subdued. In the U.S., rents fell 4.5% overall, with coastal markets experiencing sharper declines of 7.6%, following a 9.7% drop in 2024. Nashville, Houston and Indianapolis ranked as the top-performing U.S. markets. By year-end, 40% of markets were reporting flat or positive rent growth as new supply tightened.

Looking ahead, global industrial completions are projected to total 474 million square feet in 2026, the lowest level since 2018. High construction costs, regulatory challenges and tighter credit conditions are limiting new development. Prologis noted that speculative construction remains limited, with most projects being build-to-suit facilities focused on consolidation and modernization. Replacement costs currently exceed market rents by roughly 20%.

The firm said market conditions resemble the early growth phases of prior cycles, led by demand from large occupiers seeking sizable facilities.

“Supply has eased, demand is accelerating and broadening, and the bottom for rents is forming,” the report said

As a result, Prologis expects moderate global rent growth in 2026, varying by location, building size and asset quality.

In its U.S. outlook included in the company’s fourth-quarter earnings report, Prologis forecast improvements in net absorption, occupancy and rents. Net absorption is expected to reach 200 million square feet in 2026, up from 155 million square feet in 2025, while new supply is projected to fall to 180 million square feet from 200 million square feet last year. These trends are expected to reduce vacancy rates from 7.4% to approximately 7.1%–7.2%, putting upward pressure on rents throughout the year.

Source: Index Box