Pent-up Demand Revitalizes North American and European Logistics Real Estate

Logistics Leasing Activity Surges in North America and Europe

The logistics real estate market in North America and Europe is witnessing a resurgence in demand, driven by pent-up industrial requirements. According to JLL's November 2025 Global Real Estate Perspective, the third quarter of 2025 saw a notable increase in leasing activity. The report highlights a declining supply of new warehouse space, which has significantly decreased from its peak levels and is projected to continue falling through 2026. This contraction is expected to tighten vacancy rates across the Asia Pacific region and lead to a reduction in availability in North America and Europe.

European Logistics Market Sees Capital Inflow and Stable Rents

In Europe, the logistics sector is benefiting from increased investment, with industrial and logistics investment rising by 4% year-over-year to reach €17.4 billion in the first half of 2025, according to DAA Capital Partners. Despite cautious sentiment earlier in the year due to trade and macroeconomic uncertainties, the market is now seeing a thinner development pipeline and firm prime rents. CBRE's index reported an annualized prime rental growth of approximately 3.1% in the second quarter of 2025, suggesting leasing opportunities, especially in core locations.

North American Market Influenced by Geopolitical and Economic Factors

The North American logistics market is similarly impacted by global economic factors. According to Invesco, ongoing tariff resolutions could alleviate geopolitical uncertainties, thereby enhancing warehouse leasing activities. Rising homeownership costs are compelling more individuals to rent, tightening vacancies further. These factors, along with a slowdown in new building activities due to high interest rates and labor shortages, are steering the focus towards long-term growth drivers such as data centers and warehouses.

Structural Changes and Urbanization Boost Long-Term Prospects

Long-term growth in the logistics real estate sector is poised to benefit from several structural changes. These include the regionalization of manufacturing, increased defense spending, and the ongoing boom in e-commerce. Urbanization trends are further expected to bolster the demand for logistics facilities. The strategic positioning of warehouses closer to urban centers is becoming increasingly crucial to meet the fast-paced delivery expectations set by e-commerce giants. These factors collectively ensure a robust outlook for the logistics real estate market.

Investor Strategies for Leveraging Market Dislocations

Investors are advised to capitalize on current market dislocations and repricing opportunities. As highlighted by Seeking Alpha, exploiting these conditions can maximize income returns and growth. Real estate income, historically accounting for 78% of long-term returns, emphasizes the importance of strategic investment in Grade A spaces amidst limited new development supply. Investors should focus on high-quality logistics properties in key locations to leverage ongoing rental growth.

Real estate income, historically accounting for 78% of long-term returns, emphasizes the importance of strategic investment.

Falling Completions and Vacancy Rates: A Comparative Overview

The decline in new completions is evident as logistics space completions in Europe have regressed to 2017 levels, marking a 35% drop between 2022 and 2025, as reported by DAA Capital Partners. This trend, combined with declining vacancy rates, underscores the pressing need for strategic planning and investment in logistics real estate to meet future demand.

Future Implications for the Logistics Real Estate Sector

Looking ahead, the logistics real estate sector appears poised for sustained growth. The anticipated decline in availability across North America and Europe, coupled with contracting vacancy rates in Asia Pacific, signals a competitive market environment. As the industry continues to adapt to geopolitical shifts and technological advancements, investors must remain vigilant and proactive. Adopting a forward-thinking approach that leverages urbanization and e-commerce trends will be key to thriving in this evolving landscape.