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Prologis Report Predicts Industrial To Yet Again Reach New Highs In 2022

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The record-breaking pace of the U.S. industrial sector is not expected to let up in 2022. Rents, already at sky-high levels, are slated to jump another 10% this year, according to a report from one of the country’s largest industrial landlords.

San Francisco-based Prologis released the latest edition of its Industrial Business Indicator this week, which takes a pulse of industrial demand each quarter by assigning a score, with any score above 50 indicating growth is occurring. The reading for the fourth quarter of 2021 was 66.8, continuing the growth trend in 2021, with three prior scores of 66, 71 and 66, respectively.

The report found that U.S. vacancy dropped to an all-time low of 3.4% last quarter, and is expected to remain at historic lows through 2022, Logistics Management notes. Market rents, meanwhile, jumped 6.5% between Q3 and Q4, and surged more than 20% overall in 2021.

Industrial users set a new absorption record last year, taking 410M SF, up 85% over 2020. There are 390M SF of industrial space in the development pipeline, according to Prologis. Of that, 70% is pre-leased.

Surging demand will continue to place pressure on national supply chains. Prologis said those supply chains will need to expand by at least 15% “to accommodate normal inventory levels and foster resilience against future disruptions.”

In order for that to happen, “production and distribution bottlenecks need to correct so that goods may flow through supply chains in a more predictable manner,” Prologis Head of U.S. Research Heather Belfor said in an interview with Logistics Management.

About 800M SF of industrial space is needed to restore supply levels to pre-pandemic norms, Belfor said.

Demand for warehouse and distribution space as a result of skyrocketing e-commerce demand, and an ongoing push for “safety stock” to combat supply chain disruptions, sent the industrial sector to record highs in 2021, according to a Q4 report from CBRE. Average asking rents surged 11% year-over-year to a record $9.10 per SF in 2021.

Prologis is not immune to the challenges that come with tight market conditions.

​​“Space in our markets is effectively sold out,” Prologis Chief Financial Officer Thomas Olinger said in the company’s Q3 earnings call.

The firm is also reaping the rewards that come with record demand. Prologis was behind what was reportedly the most expensive industrial sale last year when it sold the Pompano Business Park in Florida for $239.2M. The sale is part of Equus Capital Partners’ purchase of a 5.4M SF nationwide Prologis portfolio for $930M, according to The Real Deal.

 

Source:  Bisnow