National CRE News In Your Inbox.

Sign up for Connect emails to stay informed with CRE stories that are 150 words or less.

Sub Markets

Property Sectors

Topics

Logistics Rent Growth Powers Through the Pandemic

National  + Weekender  | 

Pandemic uncertainty led to negative rent growth in most global logistics markets during the second quarter of 2020, Prologis reported. However, in contrast to many other property types, the sector rallied as the year went on and finished 2020 with year-over-year rent growth of 2.9% globally.

“The strength of logistics fundamentals was tested and proven in 2020 and underscored structural trends that the pandemic accelerated,” according to Prologis.

It’s important to note that 2.9% growth, while positive, represents a slowdown compared to recent years. Moreover, not all global regions fared equally well. While market rents held steady in Japan, they slipped in China on a Y-O-Y basis, and likewise in Latin America.

In the case of North American markets, the deceleration from 8% annual growth in 2019 to 3.2% in 2020 was both expected (due to rising supply levels) and not expected (due to a pandemic that nobody anticipated). “However, logistics real estate demand remained positive, prompting rental rate appreciation through most of the year,” Prologis says in its 2020 Prologis Logistics Rent Index.

All but one of the 10 markets that saw the fastest Y-O-Y rent growth in 2020 are in North America. Of those, eight are in the U.S., led by the Baltimore-Washington region at 11%.

The top 10 is rounded out by California’s Central Valley, Toronto, Reno, Nashville, New Jersey/New York City, Pennsylvania, Rio de Janeiro, Atlanta and Columbus.

“After a year of volatility, 2021 is expected to be a steady year of growth for most markets,” Prologis rays. “We note risks to the outlook, among them the ongoing pandemic and political and economic headwinds.”

The resilience of the logistics has attracted “significant equity,” according to Prologis. “In this atmosphere, we are monitoring how this wall of capital now targeting the sector could lead to areas of oversupply. Substantial structural demand tailwinds remain, replacement costs continue to rise and new supply is unlikely to meet this demand in most markets, in turn setting the tone for a year of strong rent growth.”


Subscribe to Connect Weekender

For comments, questions or concerns, please contact Paul Bubny

Connect

Inside The Story

Read more at PrologisConnect With Prologis

About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

  • ◦Lease