Industrial Leasing Rebounds as Vacancy Falls, Signaling New Growth Cycle

Record leasing and falling vacancies suggest the logistics sector is entering a new growth phase, fueled by inventory replenishment, network optimization and strengthening fundamentals, according to Prologis' latest Industrial Business Indicator.

January data showed goods moving through supply chains more efficiently, with the activity index reaching its highest level since late 2024, signaling a broad-based pickup in demand. At the same time, space utilization held steady at roughly 85%, up from an average of 84.5% last year, indicating that occupiers have largely grown into their existing footprints rather than sitting on excess capacity.

Combined with slower import volumes, the trend points to faster inventory repositioning and restocking, Prologis said.

Demand is now outpacing new supply. Net absorption exceeded deliveries in the fourth quarter, pushing vacancy down 10 basis points to 7.4%. A broader mix of customers drove leasing during the period, a sign that the recovery is widening beyond a handful of large users, the report said.

Caution among tenants also appears to be easing. Leasing activity accelerated in the second half of the year as companies returned to longer-term growth planning. In several markets, availability is tightening in certain size categories as construction completions fall off sharply. New deliveries totaled just 50 million square feet in the U.S., while development starts have dropped 71% from their peak.

Speculative construction remains muted as development economics remain challenging. Instead, build-to-suit projects are filling the gap. Starts for those projects jumped 61% year over year in the fourth quarter, as a result of specialized requirements and limited existing space that meets tenant needs.

Rent trends are beginning to stabilize as well. After several quarters of broad-based declines, 78% of markets reported slower rent drops or renewed growth. Overall, with vacancies compressing and demand strengthening, Prologis expects rent growth to accelerate in 2026.