Warehouse rental rates could potentially rise soon, as predicted by Prologis.
After a period of rapid growth, fueled by e-commerce and pandemic-related supply chain shifts, the logistics real estate sector is expected to stabilize in 2025. This transition is driven by shifts in supply chain strategies such as nearshoring and reshoring, evolving warehouse utilization, and emerging opportunities for users.
Long-Term Plans and Market Outlook
Market fundamentals are strengthening with rising demand paired with tightening supply. Investors are optimistic, with about 60% predicting growth in logistics facilities by the end of 2025, reflecting sustained confidence in the sector’s potential. Occupiers are gaining leverage in some markets due to this improved supply-demand balance, which may lead to better lease terms and highly amenitized warehousing options.
Nearshoring and Reshoring Activity
There is increased emphasis on nearshoring and reshoring as companies seek to enhance supply chain agility and reduce tariff-related risks. This is causing strategic imports acceleration and a push for logistics hubs closer to manufacturing bases and consumer centers, which supports demand for smaller, flexible warehouse spaces. Government initiatives, including incentives like the U.S. Chips Act, further encourage reshoring of manufacturing, directly impacting demand and design of logistics real estate.
Warehouse Space Utilization
Warehouse demand remains strong due to the ongoing e-commerce boom and evolving consumer habits that require faster delivery times. This has increased the need for logistics centers close to urban areas. Prices for smaller warehouses (under 100,000 sq ft) are notably higher on a per square foot basis, reflecting their strategic importance for last-mile delivery and flexible use. Users are increasingly seeking logistics facilities with amenities that support advanced operations, including technology integrations and efficient layouts.
Potential Opportunities for Users
The tightening supply and resilient demand create opportunities for users to secure favorable lease terms within the next 6 to 12 months, as landlords may be more willing to negotiate. Flexible workplace integration and multi-use spaces adjacent to logistics hubs are emerging as new investment and operational opportunities. Tenants and investors should monitor market-specific dynamics, including regional rent variances and government policy impacts, to identify strategic entry points in the industrial real estate sector.
Prologis, a leading global owner, operator, and developer of logistics real estate, has noted an uptick in nearshoring and reshoring activity, as well as domestic demand from international companies. Well-capitalized, large-scale tenants are moving forward with build-to-suit projects for their long-term growth.
In the second quarter, logistics real estate customers activated long-term plans, despite weaker demand and trade policy uncertainties. Buyers in the market looking for space, proposal volumes, and signed leases were all up in the second quarter. However, decision making among tenants has been extended due to macroeconomic uncertainties.
The current environment presents a narrow and time-sensitive window of opportunity for users to secure prime logistics real estate before rents increase. Second-half warehouse deliveries will be 30% lower year over year. Prime space options are available in select locations, but are expected to diminish as the pipeline of new deliveries slows and competition for quality product increases.
In conclusion, the logistics real estate market in 2025 is shaped by stabilization after a period of rapid growth, strong interest in nearshoring and reshoring, increased utilization of smaller, flexible warehouse spaces, and strategic opportunities for users to optimize leases and operations within evolving supply chains.
Investors are exploring the finance sector, eyeing the growth potential of logistics real estate, with about 60% predicting expansion of facilities by the end of 2025. The real-estate industry is experiencing a surge in demand for smaller, flexible warehouse spaces due to the increased focus on nearshoring and reshoring activities by companies.
