In its October Industrial Business Indicator, Prologis observed that the U.S. logistics real estate market is under-going what it called a “mini cycle” that reflects a balance between short-term cyclical uncertainty and long-term adaptation to the future of retailing and supply chain demands.
According to a new Prologis report, industrial vacanciy is expected to reach a historically low level in mid-2024. Even though a significant amount of new space was added to the market in Q3 2023 from projects begun in 2022 and the national vacancy rate rose,, companies in search of logistics space would be well advised to act soon.
The industrial property sector is currently undergoing significant changes due to various factors such as technological advancements, changing consumer behaviors, and the global economic climate. These changes are expected to shape the future of industrial property, presenting both challenges and opportunities for real estate stakeholders.
There was a time that western companies would have almost certainly, in an almost reflex action, would outsource such basic items to contract factories in China and other parts of Asia. But there now a shift in dynamics.
Industrial returns might drop until the industry moves to logistics 2.0 properties. Even warehouses that are extraordinarily well located could be left to compete for a much smaller pool of tenants if their buildings do not meet the technological needs of potential occupiers.