Prologis IBI at 59.3: U.S. Logistics Real Estate Moves Into Growth Mode

Prologis IBI Points to a Broadening Logistics Real Estate Recovery

The U.S. logistics real estate market has moved beyond a tentative recovery and into a clearer expansion, according to Prologis's latest Industrial Business Indicator. The San Francisco-based real estate investment trust's second-quarter IBI Activity Index came in at 59.3, holding within the high-50s range it has maintained through the first half of 2026. In Prologis's reading, that level signals several quarters of sustained improvement in warehouse activity, enough to describe the market as being in growth mode.

U.S. net absorption reached 66 million square feet in the quarter, the highest quarterly total since 2022 and well into expansion territory. Prologis expects roughly 220 million square feet of absorption for all of 2026 against about 205 million square feet of new completions, meaning demand should outstrip new supply over the balance of the year. Rents increased 70 basis points sequentially, and the company forecasts vacancy to decline by roughly 30 basis points for the year.

The demand picture is broader than during the early post-pandemic logistics boom. E-commerce, third-party logistics and essential goods remain active, but Prologis also points to new requirements tied to data center infrastructure, advanced manufacturing, defense-related activity and semiconductor supply chains. Melinda McLaughlin, Prologis senior vice president and global head of research, said the wider range of customers is making the recovery more durable, since it no longer depends on any single industry.

For occupiers, the combination of improving demand and constrained supply is changing how warehouse space is acquired. Prologis says large, well-located facilities are increasingly difficult to find, and waiting to act can raise both execution risk and cost exposure. That pressure is pushing more customers to begin site selection earlier and to consider built-to-suit options when existing space is unavailable.

What the 66 Million-Square-Foot Absorption Jump Signals

The headline numbers describe more than a cyclical bounce. They point to a supply-demand mismatch that is strengthening landlord pricing power in specific segments, while the source of demand is shifting from a narrow e-commerce story to a broader industrial one.

Why the absorption swing matters

At 66 million square feet, quarterly net absorption was the highest since 2022, and Prologis forecasts full-year demand of about 220 million square feet against only 205 million square feet of completions. That is a meaningful reversal from the oversupply concerns that followed the post-2022 delivery wave. An IBI reading in the high 50s supports the view that warehouse users are again confident enough to make longer-term supply chain and expansion decisions.

The tenant mix is broadening beyond e-commerce

E-commerce and essential goods remain reliable demand pillars, but Prologis identifies advanced manufacturing, data center construction, defense-related activity and semiconductor supply chains as new sources of requirements. That diversification matters because it makes absorption less vulnerable to a slowdown in any one sector, and it also changes the types of buildings in demand: large, well-located facilities and specialized space rather than only standard distribution boxes.

The rent-to-construction-cost gap still limits new supply

Even with rents rising, Prologis notes that market rents would need to rise by double digits in many locations to justify broad new development. That gap should keep speculative construction in check and reinforce tightness in prime locations, but it also means the recovery's duration and magnitude remain sensitive to economic conditions.

One interpretation risk to note: the IBI is Prologis's proprietary survey of customer sentiment, and the absorption and vacancy forecasts are company estimates rather than independent market data. The direction is consistent with the firm's reported leasing activity, but the exact pace of the recovery remains an outlook, not a settled fact.

Occupier Playbook as Big-Box Warehouse Supply Tightens

Prologis's message to occupiers is direct: with full-year demand forecast to exceed new supply by roughly 15 million square feet, waiting to secure space carries a real cost. The following steps follow directly from the company's second-quarter data and commentary.

• Start site selection before the need is urgent. Prologis says customers are beginning the process well before they need space because large, well-located facilities are especially constrained.
• Model built-to-suit as a serious option. When existing facilities are unavailable, built-to-suit is becoming a practical path rather than a fallback, according to Prologis.
• Price the cost of waiting into lease decisions. With rents up 70 basis points sequentially and Prologis forecasting vacancy to fall about 30 basis points in 2026, delaying decisions can increase both execution risk and cost exposure.
• Expect the tightest conditions in big-box and well-located space. Bulk space was about 60 basis points below the market vacancy level in the second quarter, and leasing activity for such assets is already ahead of 2025 levels.
• Prepare for a more diversified market rather than relying on a single demand driver. New requirements from data centers, defense, advanced manufacturing and semiconductor supply chains are adding demand beyond the traditional e-commerce and essential goods base.