Logistics
2025 Annual Review & Outlook
Open spaces
Warehouse vacancies expected to fall from 2024 ‘ peak ’
By William B . Cassidy
The big picture : With a large number of industrial logistics and warehousing projects launched during the COVID-19 pandemic now complete and shippers destocking or rebalancing inventories throughout the year , warehousing space is widely available across the US . Still , solid increases in US imports kept demand positive last year and developers expect supply to tighten as volumes accelerate in 2025 .
A look back : Shippers in the US had an easier time finding industrial warehousing and distribution space in 2024 as the Great Destocking of 2023 led to a widespread rebalancing of inventories in 2024 . The average US industrial vacancy rate for manufacturing and logistics properties rose to 6.8 % in the third quarter , the highest since before Covid but still slightly below the pre-pandemic average of 7.1 %, according to real estate developer JLL . At the same time , the vacancy rate in Southern California ’ s Inland Empire dropped 40 basis points to 7.4 %, the first vacancy rate reduction in the region in three years , as more e-commerce firms and Asian logistics providers sought space , JLL said . Despite lower demand , average rents in the US remained stable , the developer noted , but rent increases are slowing . According to developer Prologis , logistics capacity built to increase resiliency during the early years of the pandemic is now being used by tenants to keep costs in line during the downcycle . Utilization is increasing , however , as an inflection point draws closer , and that will force decisions on warehouse users who will need new space if US manufacturing gains steam and freight demand rises . Even so , demand for logistics space is expected to remain soft in the near term .
A look ahead : How long the near-term softness forecast by Prologis and other developers lasts depends on growth in US manufacturing , increased consumer spending and the impact of disruptions such as the Red Sea crisis and a potential second longshore strike at US East and Gulf coast ports . Trade policy and tariff changes under a second Trump administration could also change the demand equation , but their impact is not yet clear . Prologis believes industrial logistics vacancy rates have peaked , and absorption rates for warehouse construction will increase as the US freight economy improves . As demand rises , rents are expected to follow . And the dynamics that drove warehouse expansion in the early 2020s haven ’ t changed . Booming e-commerce volumes and expectations for faster end-to-end delivery of goods and inputs are still reconfiguring distribution networks , with more logistics facilities being built closer to end consumers . The rise of manufacturing in Mexico is also shifting distribution networks and needs , with new or expanded logistics facilities popping up along the US-Mexico border .
Booming e-commerce and expectations for faster end-toend delivery are still reconfiguring distribution networks .
The next inflection : A turning point in demand for warehouse and logistics facilities is expected in 2025 , but it depends largely on higher US manufacturing output and increased consumer confidence and spending . Still , some warehouse providers started warning potential customers of tightening capacity and higher rents in late 2024 , urging them to “ act now ” to avoid potential space shortages and position themselves for growth . As a result , some shippers will be looking to lock in storage and logistics capacity early this year .
email : bill . cassidy @ spglobal . com
US industrial vacancy rates rose to 6.8 % in Q3 , the highest since the start of the COVID-19 pandemic . Shutterstock . com
84 Journal of Commerce | January 6 , 2025 www . joc . com