New logistic space is at an all-time low, due to a slowdown in the flow of goods and increasing construction costs, according to recent research by Prologis, Inc.
The company's Industrial Business Indicator (IBI), reports that strong retail sales and supply chain challenges are driving urgency in leasing. U.S. net absorption reached a record high of 115 million square feet in Q3 2021 and 280 million square feet year-to-date – more than double the same period last year, pushing vacancy to a new low of 3.9%.Additionally, a new paper, "Persistent Disruption," which explores the shift logistics customers are making from "just in time" to "just in case" – or a permanent shift toward resilience. This shift will create powerful demand tailwinds in logistics real estate and could prolong or worsen the current shortage of space. Highlights include:
- Robust inventory-to-sales ratios are key to the future supply chain. Disruptions in the flow of goods will persist beyond the pandemic, driven by structural forces in climate, geopolitics and labor.
- Higher inventories will require 800 million square feet (MSF) of logistics real estate or more to fix the shortage and build in resilience. Logistics real estate leasing is not yet reflecting this demand because companies need to first focus on immediate inventory challenges.
- Gateway locations are poised to benefit as the first step on the consumption end of supply chains. Because these locations generally have high barriers to new logistics development, demand is expected to outstrip supply.
