In a mixed year for the global economy, logistics real estate fundamentals held steady. In the United States, diversified sources of demand drove vacancy rates to a new cyclical low. Developers responded to strong rent growth with increased starts, but at a more measured and prudent pace than in past cycles. The European logistics market followed suit, with demand outpacing supply. In Japan, a backlog of demand for modern logistics stock kept vacancies low in the face of accelerating deliveries.
Meanwhile, in emerging economies where economic fundamentals vary substantially by market, structural forces such as growing domestic consumption created tailwinds for demand even in challenged markets like Brazil.
E-commerce is a strong structural driver that will continue to shape demand trends in 2016. Japan, Europe and the U.S. boast among the most sophisticated e-commerce supply chains. Players in these regions have built out national and even regional distribution networks. Now, they are increasingly focused on the local and last-mile infrastructure required to meet consumer expectations for rapid or even same-day delivery. Meanwhile, global online retailers are rapidly expanding into emerging markets.
In 2016, we expect to see continuing broad drivers of demand. With vacancy rates poised to reach new lows in most markets around the world, the lack of options and need for advance planning for logistics customers will only intensify. At the same time, advancements in supply chain analytics and strategies indicate the need for increased emphasis on market, site and asset selection. And while customer sentiment remains upbeat heading into 2016, economic and geopolitical crosscurrents are more pronounced and pose greater risks to the future outlook than in the recent past.
Chris Caton, Senior Vice President, Research, Prologis