- Logistics rents in the US and Canada fell by 7% in 2024, the first decline since 2009.
- Vacancy rates rose 130 bps to 7.1%, as excess supply and economic uncertainty weighed down leasing.
- Demand shifted to high-quality Class A properties, while older Class B and C properties saw more rent cuts and concessions.
- New construction slowed, with market rents now 15% below replacement cost rents in the US.
- Prologis forecasts a leasing rebound, with rent recovery expected in 2026 as supply tightens.
For the first time in 15 years, US logistics rent growth fell into the red, down 7% in 2024, according to a new report from Prologis (PLD), as reported by GlobeSt.
By The Numbers
The drop was steeper than the 5% global decline and far worse than Europe’s 1% slip. Despite this, market rents remain 59% higher than in 2019, suggesting long-term lease renewals will still see rent growth in 2025.
One key reason for the rent drop was excess supply in certain markets like Phoenix, where longer lease-up times forced landlords to offer more concessions, such as free rent.
Rising Vacancy Rates
The U.S. logistics vacancy rate climbed to 7.1% in Q4, up 130 bps YoY and significantly higher than Europe’s 4.8% vacancy rate.
Net absorption fell by 30% in the US as economic uncertainty caused businesses to delay leasing decisions, consolidate space, and limit capital expenditures.
However, Prologis expects leasing to rebound in 2025 as excess space is absorbed and businesses adjust to evolving supply chain needs.
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High-Quality Logistics Demand
While overall rents fell, demand for newer Class A logistics properties remained strong, helping maintain rent levels at the high end of the market.
Meanwhile, older Class B and C properties saw steeper rent declines, as tenants moved to larger, more efficient facilities in lower-cost locations.
On average, rent growth for newer buildings outperformed older ones by 100 bps, reflecting shifting tenant preferences for modern, high-tech logistics spaces.
Construction Slowdown
Following a surge of new developments in 2023 and early 2024, construction has slowed due to falling rents, rising costs, and financing challenges.
Prologis reported that market rents are now 15% below replacement cost rents in the US, discouraging further speculative development.
As supply tightens, the report forecasts gradual rent recovery in 2025, with stronger gains expected in 2026—especially in markets outside of Southern California, where leasing activity remains sluggish.
Slow But Steady Recovery
While 2024 marked a challenging year for the logistics sector, strong demand for high-quality facilities and constrained future supply could help the market rebound.
Prologis predicts that Class A demand, high replacement cost rents, and fewer new deliveries will stabilize market rents in 2025, followed by stronger rent growth in 2026 as vacancy rates decline.
