Prologis research: logistics space vacancy measure reaches new low

New research by Prologis underscores key challenges facing the world’s supply chain, including logistics space at an all-time low; a slowdown in the flow of goods; and rising construction costs, the global logistics real estate company announced today in advance of its inaugural supply chain thought leadership event. The event, called “Breaking New Ground,” starts tomorrow, Oct. 27.

Industry leaders will discuss the factors associated with a healthy supply chain, including transportation, skilled and ready workforce pipelines, and leading-edge energy initiatives. Highlights from Prologis’ current Industrial Business Indicator (IBI), the company’s proprietary quarterly survey of customer activity and sentiment, include:

• 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 percent. Prologis’ Research team also released 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.

Additionally, the event will feature a conversation between UPS CEO Carol Tomé and Prologis CEO Hamid Moghadam and will be moderated by Susie Gharib, Fortune anchor and senior special correspondent. Their discussion will focus on leadership, culture and innovation.

Bestselling author Michael Lewis – a keen observer of politics, finance and American culture – will deliver closing remarks. The day will also include three panels: 

• Transportation: Jack Kennedy, founder and CEO, Platform Science; Andrew Smith, founder and CEO, Outrider; and Will O’Donnell, managing partner, Prologis Ventures, will discuss innovative transportation solutions, including fleet technology, robotics and automation. The panel will be moderated by Bryan Walsh, future correspondent, Axios.
• Energy: U.S. Representative Nanette Barragan; Dr. Lee Kindberg, Head of Environment & Sustainability, Maersk North America; Huw Phillips, VP, Real Estate Excellence, DHL; and Erik Neandross, CEO, Gladstein, Neandross & Associates will discuss renewable energy with Henrik Holland, Prologis’ global head of EV Charging.
• Workforce: Maria Flynn, CEO, Jobs for the Future (JFF), and Andy Van Kleunen, CEO, National Skills Coalition, will explore solutions to the current workforce shortage with Tyler Gray, EVP global editorial for Edelman and former Fast Company senior editor.

The full agenda is available via Prologis here.