Industrial Warehouse Demand Remains Robust, Says Prologis Report

While volatile U.S. trade policies had pushed imports forward in 2018, utilization of warehouses has stabilized this year and new supply is coming online.

Thanks to e-commerce, Prologis says demand is still robust and is predicting a vacancy rate of 4.5%.

Furthermore, says the industrial real estate giant, U.S. market rents are poised to grow by roughly 6% in 2019, after increasing by 8% in 2018.

Prologis just released its latest Industrial Business Indicator (IBI) index report, a quarterly survey of over 10,000 customers across several industries measuring the volume of goods flowing through supply chains and industrial real estate in the U.S.

The six hottest markets for logistics facility construction are Pennsylvania, Atlanta, Chicago, the Inland Empire, Dallas and Houston.

Prologis expects the completion of 260 million square feet in logistics facilities development during 2019.

“This rate of growth is in a frenzy,” says Melinda McLaughlin, Vice President, of Prologis Research. “But we believe shippers will continue to invest in warehousing to mitigate risk and secure profits.”

The U.S. logistics real estate market is poised for a broader array of outcomes that correspond to barriers to new supply. The length of the expansion—10 years and counting—has been a boon to developers, who have used that time to bring new supply online in markets with lower barriers to entry. Even so, supply is behind demand in aggregate, with vacancies holding at 4.5 percent.

Prologis Research forecasts 250 million square feet of net absorption and 260 million square feet of new supply in 2019—which in turn should keep vacancies at or near their historic lows.

“Any disconnects between demand and supply should continue to be concentrated in submarkets with high big-box activity, making market conditions challenging for customers looking to expand in all other areas,” concluded Prologis researchers.

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