The results of the new Prologis Logistics Real Estate Rent Index report confirm that 2022 was an exceptional year for the logistics industry. Global nominal and real rent increases were the highest since Prologis started monitoring them in 2007. This growth was influenced by rising construction costs and real estate values, a shortage of attractive land, and mounting regulatory barriers slowing down the development of new properties in prime locations.
As a result, rents in the USA and Canada increased by 34% in 2022, and in Europe by 15%. A combination of strong demand and limited new supply in the US meanwhile led to a decline in vacancy rates to 3.2%, while Europe maintained a record low vacancy rate of 2.7%.
Here’s a summary of key findings from the Prologis Logistics Real Estate Rent Index 2022 report:
• The global leader in rental growth acceleration was the United States. As vacancies fell, competition for space in the US intensified, and customers responded to supply chain disruptions by rapidly changing their real estate strategies.
• Global supply chain risk reduction fueled structural demand. Properties with a key location close to end customers, with access to high-quality infrastructure, enjoyed the highest demand.
• The proportion of customers looking for logistics space in locations where construction is almost impossible has increased. While construction activity is growing, emerging disparities between different regions are the result of increased regulatory barriers and a growing land deficit.
• A sharp increase in construction costs translated into rent increases. This was the result of shortages of materials and interruptions to supply chains caused by the COVID-19 pandemic and the war in Ukraine, as well as labor market disruptions and soaring inflation levels.
Prologis experts predict that the record 30% rent increase in 2022 will be followed by a period of normalization, with a slowdown in the pace of transactions and increased supply in some markets.
Find out more in the Prologis Logistics Real Estate Rent Index 2022 report.