REAL ESTATE NEWS

Prologis executives say industrial real estate is moving into a new phase defined less by breakneck expansion and more by structural, long-term demand. Their third-quarter earnings call offered a window into how the world’s largest industrial REIT views global logistics trends that are reshaping the warehouse market.

Chief Executive Hamid Moghadam, in his final call before retiring as CEO, predicted that warehouse rents will stabilize at much higher levels than current rates as the market digests shifts in global trade and supply chain strategies. “At the end of the day, it is the rate of return and replacement costs that drive long-term rents,” he said, adding that stabilization will likely come on a “much higher trend line” over time. That view aligns with findings from Deloitte and JLL, which suggest that industrial leasing has slowed slightly after years of outsized growth but remains bolstered by nearshoring and continued demand for advanced logistics facilities.

Prologis President Dan Letter said the company continues to see strength in build-to-suit and speculative projects across both U.S. and international markets, driven by customers refocusing on long-term efficiency rather than short-term uncertainty. “Customers have become more desensitized to short-term noise,” he said, crediting large, well-capitalized corporations for leading broader market confidence. This observation fits into a wider industry pattern described by Newmark and NAIOP, where many occupiers are optimizing existing footprints instead of expanding, while targeting “modern, efficient, and energy-conscious” spaces.

Demand now depends heavily on evolving supply chain strategies. The growing influence of reshoring and nearshoring—combined with policy-induced shifts in tariffs and energy spending—is reshaping logistics networks across major U.S. markets. According to analysts at CBRE and Cushman & Wakefield, this environment favors logistics hubs positioned near population centers and ports while sustaining demand for higher-end facilities that can accommodate automation and more sustainable operations.

E-commerce remains a central driver, representing about 20% of Prologis’s new leasing, but executives emphasized that future growth will come from diversification. Food, beverage, and healthcare companies are increasingly central to demand as they reconfigure supply lines to improve service speed and cost efficiency. Industry reports from Cresa and JPMorgan show that while occupiers still want flexibility, they are far more selective—seeking power capacity, sustainability features, and access to skilled labor in location decisions.

Looking ahead, Prologis expects sustained global growth opportunities in 2026 and beyond, supported by continued investment in global supply chain modernization. CFO Timothy Arndt described the company’s balance sheet as “very capable of taking on a large volume of projects,” a confidence that mirrors broader expectations of renewed absorption rates over the next 12 to 18 months.

Source: GlobeSt/ALM