Key Takeaways: 

  1. The July Industrial Business Indicator (IBI) reading reflected a better-than-expected goods economy as a majority of logistics users reported an increase in the flow of goods through U.S. facilities. The IBI increased in Q2 2023 (62.3 in July) as users saw an increase in the flow of goods. Utilization on average remained in the sweet spot of 85% to 86% during the second quarter, indicating a lack of shadow space in facilities. 
  2. The pace of rent growth is gradually returning to pre-pandemic levels with market rents up 2% in Q2 and a projected growth of 7% to 9% for the year. Leases will be subject to substantial repricing upon expiration through the near term as consecutive years of double-digit rent growth led to more than 100% markups in some markets. 
  3. A rapid fall in new construction starts points to fewer availabilities in 2024. New development starts dropped another 12% in Q2 2023. As a result, Prologis Research expects the vacancy rate to peak at 4.6% in Q4 2023 before falling to 4% by year-end 2024. 

Deeper Dive: 

Competition for space appears to be normalizing. Customers continued to expand across markets, but at a less frenzied pace relative to the last few years. Customers have been more deliberate in their decision-making, expanding the time between proposals and lease signings. The U.S. vacancy rate ticked up to 4% this quarter. 

The utilization rate stabilized at 84.8% in July. The utilization rate averaged in the optimal range at 85.3% in Q2 2023, revealing a lack of shadow space. 

U.S. consumers demonstrated a willingness to spend as their pricing power grew. Nominal core retail sales (ex-auto and gas) rose at an annual rate of 4% in Q2, twice the rate of e-commerce, as the pace of wage growth exceeded inflation. The inventory-to-sales ratio has stabilized at 1.2 over the last three months as the pandemic-driven bullwhip effect faded. Instead, inventory levels are largely returning to a normal seasonal pattern that aligns with consumption growth. 

Construction starts declined in Q2 which could put downward pressure on availabilities in 2024. Construction starts were 74 MSF in Q2 2023, down 13% from 84 MSF in Q1 2023. 

True months of supply (TMS) rose to 36.5 months. TMS (the amount of time it would take to absorb all available supply at the current demand run rate), saw an increase of 6.5 months from the prior quarter. The uptick was consistent with normalizing operating conditions and rising rents. (TMS less than 50 months corresponds with positive real rent growth.) 

Exhibit 1 IBI Activity Index

We expect vacancy rates to tick up and rent growth to decelerate in 2023. Expanding leasing decision-making timelines will likely push some takeup of space into 2024. Coupled with a dip in supply, we expect availabilities to decrease in 2024 as deliveries fall short of demand. We foresee positive real rent growth through the near term, fueled by rising replacement costs, growing barriers to new supply and ongoing secular drivers to demand. 


The U.S. logistics market appears to be normalizing to pre-pandemic levels after a period of unsustainable volatility. In aggregate, customers’ logistics activity and real estate footprints are still expanding and adapting to underlying changes in their businesses and supply chains. Leasing conditions are poised to ease somewhat in 2023, amid a wave of new deliveries. Customers are advised to take advantage because the rapid decline of new construction starts and delayed decision-making could increase competition for space in 2024. 

Exhibit 2 Utilization Rate

Summary of Net Absorption Indicators

Exhibit 4 Market Fundamentals, U.S. Exhibit 5 Market Fundamentals, U.S. – Vacancy Exhibit 6 Under Construction, U.S. Industrial

Exhibit 7 U.S. True Months of Supply Exhibit 8 U.S. Rent Growth


This material should not be construed as an offer to sell or the solicitation of an offer to buy any security. We are not soliciting any action based on this material. It is for the general information of customers of Prologis.

This report is based, in part, on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. No representation is given with respect to the accuracy or completeness of the information herein. Opinions expressed are our current opinions as of the date appearing on this report only. Prologis disclaims any and all liability relating to this report, including, without limitation, any express or implied representations or warranties for statements or errors contained in, or omissions from, this report.

Any estimates, projections or predictions given in this report are intended to be forward-looking statements. Although we believe that the expectations in such forward-looking statements are reasonable, we can give no assurance that any forward-looking statements will prove to be correct. Such estimates are subject to actual known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in our expectations or any change in circumstances upon which such statement is based.

No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of Prologis.


Prologis’ Research department studies fundamental and investment trends and Prologis’ customers’ needs to assist in identifying opportunities and avoiding risk across four continents. The team contributes to investment decisions and long-term strategic initiatives, in addition to publishing white papers and other research reports. Prologis publishes research on the market dynamics impacting Prologis’ customers’ businesses, including global supply chain issues and developments in the logistics and real estate industries. Prologis’ dedicated research team works collaboratively with all company departments to help guide Prologis’ market entry, expansion, acquisition and development strategies.


Prologis, Inc. is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. As of December 31, 2022, the company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties  and development projects expected to total approximately  1.2 billion square feet (111 million square meters) in 19 countries. Prologis leases modern logistics facilities to a diverse base of approximately 6,600 customers principally across two major categories: business-to-business and retail/online fulfillment.

Older Research
Impacts of Nearshoring on Demand for Mexican Logistics Real Estate
Newer Research
Port Disruption and the Flow of Goods Through Southern California
Park Grande, Building


Every connection starts with a conversation. Our team is here to help.