Logistics warehouse rents may rebound after 2025 drop: Prologis

Core Insights - U.S. logistics real estate rents experienced a 4.5% year-over-year decline in 2025, driven by subdued demand and a shift towards more cost-efficient locations [3][9] - Coastal markets were significantly impacted, with rents declining by 7.6% year-over-year, while inland markets saw a smaller decline of 3% [3][9] - The overall decline in rents was less severe than in 2024, which saw a 6.5% year-over-year drop, indicating potential for a rebound in the current year [9] Market Trends - Warehouse tenants are increasingly seeking newly completed, large-format facilities with lower rental rates, often located in more distant markets to enhance cost-efficiency [3][4] - Demand for logistics real estate began to heat up in the second half of the previous year, as companies became more comfortable with long-term leasing despite ongoing trade uncertainties [5] - Net absorption outpaced new supply in Q4, resulting in a decrease in vacancy rates to 7.4% [5] Competitive Landscape - Limited speculative deliveries and quicker lease execution are setting the stage for heightened competition for logistics space as networks expand to meet growth and supply chain needs [6] - Large retailers, particularly those with e-commerce operations, are driving demand as they expand their networks to improve delivery times and efficiency, contributing to approximately 20% of Prologis' new leasing activity [7] - Improved customer sentiment and better-than-expected market conditions suggest that vacancy rates have peaked and rents may be starting to increase in various markets [8]