Warehouse operator Prologis sees “a new cycle is kicking off” in 2026. Rental demand was soft in the first half of 2025 but improved in the back half as trade headwinds cleared and corporations refocused on long-term supply chain needs.
“Softness in early 2025 gave way to renewed activity from large users and e-commerce operators once trade policies fell into a narrower band of potential outcomes,” a Thursday report from Prologis Research said.
Weak trends were seen worldwide last year as global rents fell 3.7%. The average rent decline was 2.3% in the first half of the year, slowing to just 1.4% by the second half.
“This shift marks a critical transition period for occupiers, operators, investors and developers as planning for 2026 accelerates,” the report said.
Prologis (NYSE: PLD) said demand from consumption-oriented and e-commerce-related companies led the way last year while the manufacturing complex remained weak.
Rents were down 4.5% across the U.S. in 2025, with coastal markets seeing heavier declines—down 7.6% following a 9.7% drop in 2024. The top-three performing markets in the U.S. were Nashville, Tennessee; Houston; and Indianapolis.
By the end of the year, 40% of all markets were seeing flat or positive rents as new supply became constrained.
Global facility completions are expected to deliver 474 million square feet of space to the market in 2026—the lowest level since 2018. (Further, Prologis expects U.S. completions to fall to their lowest level in a decade.)
High construction costs, regulatory barriers and tighter credit markets are some of the constraints on new builds. Prologis also said only a few companies are taking a chance on speculative projects and that most are pursuing build-to-suit facilities with an emphasis on consolidating and modernizing operations.
Replacement costs are currently 20% above market rents. Prologis said the market resembles “early growth phases from recent prior cycles,” with demand from large companies searching for large facilities leading the way.
“Supply has eased, demand is accelerating and broadening, and the bottom for rents is forming,” the report said. “As a result, Prologis Research expects moderate global rent growth in 2026 with variability by location, size and quality.”
The company’s U.S. outlook, which was provided as part of its fourth-quarter report last week, calls for improvement in key metrics like net absorption, occupancy and rents.
It expects net absorption of 200 million square feet in 2026 compared to 155 million square feet last year. New warehouses coming online will deliver 180 million square feet of space, down from 200 million square feet last year. The changes are expected to reduce vacancies from 7.4% to approximately 7.1% to 7.2%, placing upward pressure on rents throughout the year.
