Global logistics rents declined by five percent in 2024 due to normalising market conditions, according to a new white paper from Prologis.
The manager says an influx of new supply — coupled with positive but subdued demand rooted in economic, financial market and supply chain uncertainty — pushed vacancy rates up in most markets across the globe. As a result, rents have fallen after more than a decade of consistent growth.
Europe saw a 1 percent decline in net effective rents. Most European markets saw stable headline rents, due to deliveries at peak pricing in 2022, which incentivised developers to hold firm to achieve planned margins, according to Prologis. But rising vacancies, particularly in supply-heavy markets such as Poland and Hungary, resulted in increased concessions. The vacancy rate in Europe was 4.8 percent in the fourth quarter of 2024 — up by 100 basis points year-over-year.
Upward movement in free rent reduced net effective rents by 1 percent in Southern Europe to 4 percent in central Europe during 2024. High-barrier markets, such as France and Germany, fared better because of low vacancy and constrained supply. Soft demand, influenced by economic headwinds and geopolitical risks, could weigh on 2025 performance. Limited new supply and high replacement costs, however, should support rental rate increases in late 2025.
The United States and Canada saw a 7 percent decrease in rents, which was pulled down by Southern California. Oversupply in Phoenix and northern Las Vegas reversed rental gains, and weak demand in the Pacific Northwest pressured rents. Rents fell by 1 percent otherwise, with Southeastern markets showing resilience. Vacancies are expected to decline, and leasing activity improve in 2025, due to economic growth, a shifting trade environment, nearshoring and the demand for bulk space.
In Asia, China saw accelerated market rent declines, which fell by 9 percent. Rental decline is expected to slow, as the construction pipeline decreases, and existing vacancies are absorbed. Potential tariffs may create volatility, however. In Japan, rents increased by 2 percent in 2024. Labour-law changes pushed tenants to seek efficient, modern facilities. Construction costs increased, reducing new starts in metropolitan areas. High replacement costs are expected to drive up net effective rental rates, says the paper.
Despite annual rent growth in the United States and Europe being negative for the first time since the global financial crisis, leases rolling in 2025 still face a significant increase in most locations. Year-end 2024 market rents were 59 percent higher in the United States and 33 percent higher in Europe than year-end 2019.
As market rents expect recovery due to constrained supply, high replacement cost and demand for class A properties, upward pressure on a broad range of locations and building types will lead to improved recovery in market rents in 2025 and 2026, adds the report.
Source: https://irei.com/publications/article/global-logistics-rents-declined-by-5-in-2024/
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