PROLOGIS; Rebound in Logistics Activity Sustained
Swisslog Ventura Stacker Crane for High Bay Fulfillment Centers
The Broad View
Prologis’ IBI, the company’s proprietary survey of logistics real estate customer activity, reflected a sentiment of growth in the third quarter of 2020 after a period of historic volatility in the second quarter. Activity levels reached 59 in September – in line with strong growth. Utilization recovered during the same period, hovering in the 84-85% range – near capacity - after having fallen to ~83% in April.
Demand for logistics real estate strengthened and diversified, with leasing momentum across a broader range of industries and size categories.1 Net absorption surged to nearly 65 million square feet (MSF), led by key locations along supply chains and near large populations, including Southern California, New Jersey/New York, Dallas and Atlanta.2 Given low vacancy, leasing was propelled by incoming new supply, which tallied 89 MSF in the quarter. As demand kept up with new supply, the vacancy rate remained low, at 5.0%. Rent concessions that had been put into place due to heightened uncertainty around COVID-19 were rolled back; as a result, market rents reaccelerated, growing 2% in the third quarter.
Operating conditions improved measurably over the past 9 days and, as a result, Prologis Research upgraded our forecast for 2020 net absorption to 210 MSF from 160 MSF in Q2’20 and 100 MSF in Q1’20. The forecast for completions was also revised up, to 295 MSF from 250 MSF in the second quarter of 2020. At year-end, we expect vacancy of 5.0% and full-year 2020 rent growth of 2.5%, which reflects a much faster return to growth than anticipated; this growth is driven by strong demand for space.
