Prologis report lays bare supply chain crisis

New research by Prologis, a global leader in logistics real estate, has highlighted the global supply chain crisis, with logistics space at an all-time low, a slowdown in the flow of goods and rising construction costs.

Prologis‘ Research team’s new paper, Persistent Disruption,  explores the shift logistics customers are making from “just in time” to “just in case” – or a permanent shift toward resilience. This shift will create powerful demand tailwinds in logistics real estate and could prolong or worsen the current shortage of space.

Highlights include:

• Robust inventory-to-sales ratios are key to the future supply chain. Disruptions in the flow of goods will persist beyond the pandemic, driven by structural forces in climate, geopolitics and labour.
• Higher inventories will require 800 million sq ft (74.3 million sq m) of logistics real estate or more to fix the shortage and build in resilience. Logistics real estate leasing is not yet reflecting this demand because companies need to first focus on immediate inventory challenges.
• Gateway locations are poised to benefit as the first step on the consumption end of supply chains. Because these locations generally have high barriers to new logistics development, demand is expected to outstrip supply.

Eva van der Pluijm-Kok, Director, Research & Strategy at Prologis, commented: “During Q3, we saw a record low of 3.0% in vacancies in Europe. This trend already pointed towards increasing demand for space and for inventory stock up early on.

“In the UK, due to Brexit, the urgency to build supply chain resilience has been somewhat expected but we also saw that the disruption was more severe than predicted In Europe, demand to build inventory has been traditionally low. This is now slowly changing and leading to shortages.

“Both across Europe and the UK, findings show that the demand for logistics space and to increase inventories will continue as part of customers’ aim to build resilience.”

Furthermore, Prologis’ current Industrial Business Indicator (IBI), the company’s proprietary quarterly survey of customer activity and sentiment, reveal that strong retail sales and supply chain challenges are driving urgency in leasing. US net absorption reached a record high of 115 million sq ft (10.7 million sq m) in Q3 2021 and 280 million sq ft (26 million sq m) year-to-date – more than double the same period last year, pushing vacancy to a new low of 3.9%.

CLICK HERE to download the Persistent Disruption report by Prologis.