Key Takeaways:

U.S. logistics market data is sending mixed messages as certain industry segments respond to near-term uncertainty while continuing to prioritize supply chain optimization for the long-term. Here are three important trends to know about logistics real estate. 

  1. Activity levels correspond with growth in logistics real estate demand. Our Industrial Business Indicator (IBI™) remained steady in October at 57.3, in line with the Q3 average, reflecting continued strength in consumer spending and growth in the flow of goods.
  2. Logistics real estate dynamics remain tight in most markets. The national vacancy rate remains very low, 4.8% vs. a historical expansionary average of 6.1%, even as the pace of new deliveries quickened and added 70 bps to market vacancies.
  3. Significant rental rate increases upon lease expiration will remain the norm, even as market rent growth normalizes from its blistering pace of 2021/2022. U.S. rent growth totaled 85% from 2019-Q3 2023, which will continue to produce steep rental rate increases for customers upon lease expiration.2

Deeper Dive:

As macro factors intensified, timelines for decision making extended. As interest rates climbed, customers increased scrutiny of CapEx spend and inventory carry. This slowed the pace of leasing, pulling down realized net absorption to 42 million square feet (MSF) in Q3 from 49 MSF in Q2, even as the volume of requirements in the market remained elevated compared to historical trends.3 However, October’s IBI Activity Index reading of 57.3 corresponds with an annual demand run rate of 175 MSF, indicating the ongoing need for network expansion. 

A rapidly emptying construction pipeline opened leasing opportunities in select markets and submarkets. New logistics space deliveries totaled 121 MSF in Q3, reflecting the large number of projects started in 2022. Market vacancies rose to 4.8% in Prologis’s U.S. markets, up 70 bps since the previous quarter but still well below historical averages in most markets. Increased availabilities will be concentrated in specific size segments and locations, given that more than half of the pipeline is in just eight markets. 

We expect the window to act on the increased availabilities will be short, as speculative construction starts declined to the lowest level since Q2 2020. Replacement cost rents (or the rent needed to justify the cost and risk of development) increased in Q3 as materials and labor costs remained high, capital costs increased, and construction lending conditions tightened. As a result, Q3 speculative starts were down 65% from peak levels and continue to fall. Given this pattern, customers could face renewed scarcity in H2 2024 and beyond. Market rent growth outpaced inflation in aggregate, with divergence by market. We expect approximately 7% growth

in 2023, as rents in many markets are on pace to increase by 10% or more in 2023; however, there are a handful of sizeable markets with flat or declining rents, including Southern California, Houston and Indianapolis. Logistics real estate occupiers should face a steep rental rate increase upon lease expiration over the next 12 months as U.S. rent growth totaled 85% from 2019 to Q3 2023, with wide variation by market. Vacancies are poised to peak at a historically low level in mid-2024. Our forecast calls for 195 MSF of demand in 2023 compared to 490 MSF of new supply, pushing the vacancy rate up to 5.4% at year-end. Looking ahead, the sharp decline in starts in 2023 will translate to a low level of deliveries beginning in H2 2024 and continuing into 2025, which should put renewed downward pressure on the vacancy rate.


The U.S. logistics real estate market is under-going 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. Customers are still expanding their real estate footprints, albeit at a normalized pace compared to the frenzy of 2021 and 2022. Some leasing activity is being delayed until 2024, and next year’s deliveries are poised to fall sharply, which should re-introduce scarcity to many markets. As a result, we recommend that customers act quickly to take advantage of increased availabilities.


1. Market data for the top 31 U.S. markets where Prologis has a presence. Sources: CBRE, JLL, Cushman & Wakefield, Colliers, Costar, Prologis Research.

2. Prologis Research estimate based on market rent growth, a 5-year lease term and standard rent bumps for top 31 U.S. markets.

3. Tenants in the market estimates sourced from CBRE and JLL for top 10 U.S. markets.


Forward-Looking Statements

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.

About Prologis Research

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.

About Prologis

Prologis, Inc. is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. As of September 30, 2023, 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 (114 million square meters) in 19 countries. Prologis leases modern logistics facilities to a diverse base of approximately 6,700 customers principally across two major categories: business-to-business and retail/online fulfillment.

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