Positive outlook despite slowdown in early 2024

All three global regions registered cooling industrial fundamentals during Q1 2024, with a recovery in demand anticipated to begin in the second half of 2024. While absorption figures fell sharply over the quarter in the U.S. and Asia Pacific, both noted an increase in inquiries. Rental growth in all three regions remained positive, albeit at a slowing pace.

Ongoing geopolitical tensions have impacted shipping activity in EMEA and Asia Pacific, while climate-related disruptions were evident in the Panama Canal. East Coast port markets in the U.S. are also dealing with the aftermath of the bridge collapse in Baltimore, which will shift sea cargo volumes to nearby ports in the short term while wreckage is cleared and a temporary shipping lane is created. Shifting supply chain trends will continue to affect all three regions as nearshoring continues, with some European manufacturers opting to move operations to the U.S. or Mexico due to the lower cost of power. Futureproofing efforts will support industrial activity for high-quality space, as available supply that is ESG compliant and has reliable, renewable energy is limited across logistics markets globally. Occupiers are opting to lease Class A space to meet future needs for their operations while looking to invest in critical areas such as technology integration and automation.

Future trends: Shifting supply chains and sustainability set to be enduring themes

Short-term: While the year started off slower than anticipated, the second half of 2024 is anticipated to gain momentum in occupier transactions. Global e-commerce sales are forecast to achieve year-over-year revenue growth of almost 9%, surpassing a record-breaking $6.3 trillion figure in 2023. Supply chains will continue to shift in the post-pandemic world as occupiers aim for more localized distribution networks. All three regions will feel the impacts of shipping routes that have been affected by both geopolitical tensions and climate-related hurdles. Slowing new construction will also be evident across regions for a variety of reasons including elevated land prices, construction costs and a lack of available labor.

Long-term: Logistics demand will be driven by sustainability initiatives across regions, with the U.S. in particular seeing marked growth in the renewable energy sector. Existing manufacturing stock is quite aged compared to warehouse and distribution space, leading to a surge in new manufacturing construction in the U.S., while the focus will tilt to retrofitting existing buildings to meet manufacturing demand in many other major markets given the lack of available land. Rapid advancements in automation and technology will also contribute to requirements for futureproofed industrial buildings as some occupiers utilize new technology for tasks such as picking, sorting and packaging, which in turn is increasing demand for specialized facilities.