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The U.S. Will Run Out of Industrial Space Soon, Says Prologis

Despite the fact that 375 million square feet of distribution space is expected to open up in 2022, booming demand for U.S. industrial warehouse space is expected to eclipse supply, according to logistics real estate investment trust Prologis. If the current rate of demand continues, logistics tenants are set to gobble every last morsel of space 16 months from now. While 16 months may not sound like an alarmingly short period, according to Prologis’ head of U.S. research, the projected timeline for industrial demand outpacing supply had never been shorter than double that amount

From the fourth quarter of 2021 to the first quarter of 2022, industrial rents increased by 8.5 percent, while vacancies fell to 3.2 percent. The record-low inventory is a result of a combination of factors: a dramatic shift of consumer habits induced by the COVID-19 pandemic, supply chain delays, and laggard rates of construction. Prologis also projects a whopping 22 percent rent increase for this year. 

Amazon, who led the charge of snatching available warehouse space during the pandemic to accommodate the e-commerce market roar, might have the biggest impact on the industrial market depending on what they decide to do next. Amazon had announced that they would “taper off” their rate of industrial acquisitions, but Prologis insists that Amazon’s proposed slowdown would have little impact on the white-hot market. But if Amazon decides to offload excess space that they purchased during their pandemic buying blitz, which is a possibility as the retail giant is now stuck with maintenance costs for empty shelves, it could seriously ease the market.

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