Logistics activity slows in 2024 as occupiers delay decisions

Industrial leasing was broadly stable in Q4 2024, with volumes higher than the previous quarter across all three regions. However, activity continued to decline over the full year as occupiers focus on increasing utilization of existing space and delay transactions amid uncertainty and high costs. Despite extended decision-making timelines, demand remains poised for further growth at more sustainable levels. Supply chains continue to evolve in conjunction with persistent e-commerce growth and increasing demand for last-mile facilities, which combined with an emphasis on nearshoring or diversifying manufacturing operations will underpin the sector’s long-term prospects.

Leasing volumes in North America were marginally higher during Q4 than the previous quarter but annual volumes fell by 27% compared with 2023. Take-up in Europe rose by 19% over the quarter, with full-year volumes 5% below 2023 and in line with 2019 levels. In Asia Pacific, 2024 marked a slowdown from the record levels of the previous year with absorption 13% lower.

Future trends: More balanced market emerging following pandemic-era disruptions

Short-term: Occupiers are likely to continue to be cautious on expansion as they work through excess capacity while managing high costs and an uncertain policy backdrop. But underlying demand for high-quality, modern space is still robust in many markets and leasing volumes are expected to stabilise or grow moderately across regions over the next 12 months as spare capacity is absorbed and delayed deals transact. Vacancy is anticipated to continue increasing during the first half of 2025 as deal conversion timelines remain extended, before stabilizing as new supply reduces. Landlords will demonstrate greater flexibility in markets with higher vacancy, offering more concessions to attract and retain tenants.

Long-term: Despite a slowdown in activity following the pandemic-era surge, the industrial market remains poised for long-term growth. Evolving supply chains, persistent consumer and e-commerce growth and increasing demand for last-mile facilities will continue to underpin the sector’s long-term prospects. An ongoing emphasis on nearshoring or diversifying manufacturing operations will provide further support to industrial real estate demand in many markets. Greater barriers to new supply, coupled with tenant demand for more modern, efficient buildings, will support renewed rental growth for high-quality space as construction declines from recent peak levels.