L
ogistics real estate rents took a hit in 2024, plummeting by 7% across the US and Canada. The downturn was largely driven by Southern California's market, where rents dropped over 20%. This decline is a stark contrast to the surge in demand that fueled rent hikes from 2020 to 2022.

    A perfect storm of factors contributed to the decline: delayed decisions, consolidation efforts, limited capital access, and ongoing supply chain uncertainties. As a result, users opted to leverage existing capacity rather than absorb new space, moderating rent growth.

    For the US, this marked the first time annual logistics rents declined since the 2007-2009 global financial crisis. However, despite the drop, year-end market rents in 2024 were still 59% higher than five years prior. This means that leases signed in 2025 will likely face significant rent increases.

    A shift towards Class A properties was notable last year, as tenants prioritized high-quality facilities with annual rent growth outperforming older buildings by about 100 basis points. In response, Class B and C properties dropped rents to attract customers.

    Prologis predicts that warehouse demand could rebound in 2025, driven by improved economic growth, shifting trade environments, onshoring, and the need for bulk space amid dwindling availability. Third-party logistics providers (3PLs) are expected to drive much of this demand, as retailers and wholesalers outsource distribution operations for flexibility, capital preservation, and focus.

    CBRE notes that utilizing 3PLs allows companies to maintain inventory flexibility, a crucial component in times of uncertainty. This also enables businesses to concentrate on core competencies that drive revenue, such as product development, sales, and customer service. As a result, 3PLs' share of overall industrial leasing activity is expected to remain at or near 35% in 2025.