From Adjustment to Turning Point: The Global Logistics Real Estate Rent Cycle and the Re-pricing of North American Warehousing Value

From Adjustment to Turning Point: The Global Logistics Real Estate Rent Cycle and the Repricing of North American Warehouse Value

In 2024, global logistics real estate rents experienced their first substantial correction in over a decade—according to the latest data from Prologis, global rents fell 5% year-over-year. This figure easily evokes thoughts of 'recession' in news headlines, but upon deeper analysis, it becomes clear: this is more like a 'cooling off' of the market from overheating to normalization, rather than a structural disease. What truly deserves attention is that the slope of the rent curve is changing, and 2025 is likely to become the turning point of this cycle.

Why Are Rents Falling? The 'Scylla and Charybdis' of Supply and Demand

Over the past decade, e-commerce penetration has surged from single digits to over 20%, coupled with the global supply chain's shift from 'Just-in-Time' to 'Just-in-Case', logistics warehouse demand experienced an unprecedented expansion. Developers and capital poured in frantically, leading to a concentrated release of new supply in 2022-2023. At the same time, global economic growth slowed, and corporate inventory strategies shifted from 'over-safe' to 'lean management', causing temporary weakness on the demand side. The narrowing of the supply-demand mismatch directly triggered rent adjustments.

But note: this rent decline is not due to mass tenant lease cancellations or runaway vacancy rates (Prologis's core market vacancy rate remains below 6%), but rather a fine-tuning from a seller's market to a buyer's market. Essentially, the rent curve is returning from a 'vertical climb' to a 'normal slope', which is an endogenous cyclical adjustment.

Who Will Benefit? Who Will Face Pressure?

Short-term beneficiaries: Tenants. Logistics companies and retailers that were forced to accept double-digit increases over the past two years now have leverage for renegotiation. In particular, rents for new leases signed in 2024 are generally lower than renewal rents, meaning pressure on tenants' cost side is easing.

Those under pressure: Cap-rate-sensitive investors. Falling rents combined with high interest rates put pressure on logistics real estate valuations. Private equity funds that acquired assets at extremely high cap rates in 2021-2022 face unrealized losses and refinancing challenges. However, high-quality assets in core locations with long-term leases remain resilient, with rent declines far less than those of older suburban warehouses.

Long-term winners: Operators focusing on 'last-mile' and automated warehousing. Rent normalization will instead drive industry consolidation: inefficient assets exit, and companies with automation capabilities and experience in developing high-standard warehouses (such as Prologis, AMB, etc.) will expand their market share by leveraging cost advantages and customer stickiness.

North American Market: Three Signals That Rents Have Bottomed

North America is the core market for global logistics real estate, contributing nearly 70% of Prologis's rental income. Data from this region reveals clear signals that rents are about to bottom:1. Net Absorption Rebounds: In Q4 2024, net absorption of North American logistics real estate increased by 40% quarter-over-quarter, returning to positive territory. The recovery in leasing activity suggests that the demand bottom has passed. 2. Supply Peak Subsides: New supply is expected to decline by 30% in 2025, and the supply-demand gap will narrow in the second half of the year. Prologis expects rents to stabilize in 2025 and return to positive growth in 2026. 3. Capital Shifts to "Bottom Fishing": Institutional investors such as Blackstone and KKR have recently stepped up acquisitions of logistics assets, with cap rates approaching historical averages. Capital flows indicate that the market expects rents to bottom out soon.

Implications for the Industry Chain and Investors

For the Industry Chain: Stabilization of logistics real estate rents will reduce total supply chain costs, but companies should no longer bet on "rents being cheap forever." Future warehousing costs will diverge: "last-mile" warehouses near consumption centers will command a premium due to scarcity, while rents for inland hub warehouses will slow down. Supply chain network design needs to reassess the balance between "delivery speed" and "rent cost."

• For Investors: This round of rent adjustment offers a rare "right-side entry" window. Prioritize the following asset types:
• Import/export logistics facilities on the U.S.-Mexico border (benefiting from nearshoring)
• High-standard warehouses equipped with cold chain or automation equipment (strong tenant stickiness)
• Light-asset platforms based on AI-driven lease demand predictions (e.g., Prologis's Logistics and Data Solutions)

Key Observations

1. The 2024 rent decline is a market normalization, not a structural recession. Historical data shows that after double-digit growth, logistics real estate rents typically undergo a 12-18 month adjustment period, followed by a mild upward trajectory. 2. Supply-demand rebalancing is near completion: Global space under construction has dropped 40% from its peak, and new supply in 2025 will be below the long-term average. 3. North American logistics real estate benefits in the long term from three major trends: e-commerce penetration moving toward 30%, manufacturing reshoring driving industrial real estate demand, and digital supply chains restructuring warehousing networks. 4. Investors should focus on the intersection of cap rates and the rent inflection point: The average cap rate for North American logistics real estate is currently around 5.5%. If rents stabilize in 2025, cap rates could compress to below 5.0%, offering value revaluation opportunities. 5. For tenants, the first half of 2025 remains a negotiation window, but they should lock in long-term leases to avoid future rent upside risk.

Long-Term Trend Outlook (2025-2028)Over the next three years, global logistics real estate rents will enter a "moderate growth phase," with average annual increases of approximately 2-4%, far lower than the 8-12% seen in 2021-2022. However, structural changes will be more profound: - Automated Warehousing: Robot penetration will rise from the current 15% to 30%, improving unit storage efficiency and thereby diluting unit rental costs. - Cold Chain & Life Sciences: Cold chain demand from biopharmaceuticals and prepared foods will become a new engine for rent growth, with rents for specialized warehouses possibly rising twice as fast as those for general warehouses. - Nearshoring Dividend: Warehouse rents in Monterrey, Mexico, and border towns in Texas, USA, will gain an additional premium due to manufacturing relocation, expected to lead the national average by 20% before 2027.

Every adjustment in the rent cycle is a redefinition of value. The 5% decline in 2024 is not an end, but a prelude to the next round of long-term appreciation. For those who understand North American commercial real estate, the true signal is not the past price, but the turning point of the present.