Logistics activity slows as occupiers maintain caution

Industrial leasing continued to slow from 2023 levels across regions during Q3 as occupiers looked to push utilization rates on existing space higher and delayed decisions amid high interest rates and energy costs as well as supply chain and policy uncertainty. The long-term outlook remains favorable as easing interest rates support consumer confidence, the share of e-commerce spending rises and manufacturing activity picks up. Demand is anticipated to increase in 2025 as uncertainty reduces and transactions complete, while construction pipelines are falling from record levels.

U.S. industrial leasing volumes were broadly flat over the quarter but 26% lower year-over-year despite greater touring activity in many markets as transaction timelines remain lengthy. Leasing activity declined by 19% over the year across European markets, with limited availability for prime space a constraining factor. In Asia Pacific, net absorption rose by 34% from the previous quarter, yet was still 22% below record 2023 levels.

Future trends: Period of adjustment leading to more strategically positioned portfolios

Outlook for 2025: While occupiers remain cautious as they focus on cost management, navigate uncertainty and evaluate supply chain strategies, underlying demand is still robust in many markets. Leasing volumes are expected to increase moderately across regions over the next 12 months with occupiers working through excess capacity and actioning delayed deals as manufacturing activity rises, consumer spending stays firm and economic growth continues. A slowing development pipeline will shift markets more into balance and keep availability of high-quality modern space limited, supporting lower but positive rental growth.

Long-term: The industrial market remains positioned for long-term growth despite cyclical challenges. Industries including Logistics & Distribution, Construction Materials & Building Fixtures and 3PL’s will remain primary sources of demand, and the rise of Asian 3PLs in particular has the potential to reshape market dynamics. Continued growth is also anticipated in the Manufacturing, Automotive and Energy & Utilities sectors. The expansion of manufacturing operations requiring extensive operational footprints is likely to drive greater demand for mega-box facilities and large-scale industrial leases. Take-up will increasingly shift towards new Grade A space which combines modern layouts with more power availability and efficiency, as well as the ability to integrate improved technology and amenities.