Logistics activity moderating in 2023

Activity in the logistics sector moderated during the second quarter with the impact of slower economic growth and limited vacant stock evident in Europe and North America, although a wave of new supply supported absorption in Asia Pacific. Market fundamentals are still healthy though, with constrained supply in many mature markets despite an elevated level of new completions. Rents continue to increase globally, but at slower rates than the peak levels seen over the last two years: rents in Q2 climbed by 18.4% year-over-year in the U.S., by 10.8% in Europe and by 6.4% across Asia Pacific. 

Future trends: Effects of nearshoring still taking shape

Short-term: Leasing activity is expected to continue near current rates over the remainder of 2023 as it normalizes from its post-pandemic peak in Europe and North America, while take-up will stay above historic levels in Asia Pacific. Record amounts of new inventory will be delivered by the end of the year, especially in the U.S. and Asia Pacific, causing vacancy rates to carry on edging higher. But the increased cost of capital and limited sites for new development in many mature markets will see groundbreakings continue to decline, and rental rates are likely to show positive though more moderate gains over the year.

Long-term: The effects of companies nearshoring their operations have yet to be seen and will play out in the coming years. It is expected that markets near manufacturing corridors and the growing number of EV mega-site projects under construction will experience elevated levels of activity due to supplier demand. To address issues arising from increased package volumes, some cities are employing ‘smart city logistics’ tactics such as real-time traffic monitoring and alternative transport to create more sustainable and economically efficient urban spaces.