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Prologis: Warehouse vacancy rates to remain at all-time lows in 2022

Rents expected to rise at least 10% year-over-year

Not much empty space out there (Photo: Jim Allen/FreightWaves)

Logistics warehouse vacancy rates across the U.S. will remain at or near historic lows during 2022, according to a report released Wednesday by Prologis Inc.’s research arm. The projections suggest it will once again be very difficult to procure space throughout the year.

Vacancy rates ended 2021 at an all-time low of 3.4%, despite 270 million square feet of supply entering the market. A record 410 million square feet was snapped up last year — 85% higher than 2020 levels — and about 400 million square feet will be spoken for this year, according to the report.

Of 390 million square feet of space now in the pipeline, 70% is pre-leased, according to the world’s largest developers and operators of logistics warehousing. Rents are expected to rise 10% in 2022 based on what the company (NYSE: PLD) called its “best case.”

The ongoing demand for e-commerce fulfillment services, combined with continued supply chain logjams, will keep current warehouse space filled to the max, Prologis said. Capacity will need to expand over time by at least 15% from current levels to accommodate normal inventory levels and build resilience against future disruptions. Supply chain disruptions are expected to persist into 2023, Prologis predicted.

The findings echo comments made last October by Chairman and CEO Hamad R. Moghadam at a company event. Moghadam said vacancy rates were at “unprecedented lows” in the wake of runaway demand for logistics warehouse space that has far outstripped capacity growth. In a well-publicized remark, Moghadam said that warehouse space in its markets was “effectively sold out.”

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.