The meshing of record-high industrial leasing activity, declining vacancy rates, and inventory replenishment efforts marked a turning point in the market, according to the new edition of the Industrial Business Indicator (IBI) issued this week by San Francisco-based real investment trust company Prologis.
Prologis defines the IBI as a survey of customer sentiment focused on customer activity in warehousing.
The January IBI Activity Index reading, at 59.1, marks its highest level since November 2024, which the firm attributed to goods moving more quickly downstream through the supply chain, coupled with retailers replenishing inventory. And it added that over the second half of 2025, utilization rates remained steady into the new year, at around 85%, just below the historical threshold, as inventories were “historically lean.”
When asked if the IBI Activity Index has the potential to remain at, or around, its current level going forward, Melinda McLaughlin, Global Head of Research at Prologis, explained that IBI activity is expected to fluctuate. The reason for that, she explained is that inventory management strategies continue to emphasize lean inventory levels, and Prologis’s sector-specific index results suggest that recent movement reflects inventory repositioning rather than broad-based restocking across the supply chain.
“That said, as we reported during our earnings call last month, recent customer activity and market signals point to improving fundamentals,” she said. “Net absorption has begun to outpace new supply in several markets and customer behavior is becoming more forward-looking in response to continued resilience among U.S. consumers. These dynamics support the potential for IBI activity to remain elevated in the near term, even as companies remain disciplined in how they manage inventory and adjust network positioning.”
In terms of demand for industrial space, the report said it was accelerated among a broader group of customers in the fourth quarter, subsequently outpacing deliveries of new space. This, in turn, said Prologis, saw vacancies fall 10 basis points, to 7.4%, and reflect the emergent recovery that should progress through 2026.
McLaughlin observed that activity has broadened beyond large-format facilities and is occurring across all building sizes.
“Active industries include retail, particularly e-commerce, as well as food and beverage, healthcare, data centers, and manufacturing,” she said. “Looking ahead, vacancies are expected to trend lower, with rent growth stabilizing across most markets in 2026, supporting continued pricing power as supply remains constrained.”
As a result of that, Prologis noted that users evaluating space needs may face increased competition and reduced options over the next year.
In regards to whether that could that lead to more speculative development or repurposing of sites as leases expire, McLaughlin said that the U.S. development environment remains unfavorable for broad-based speculative construction.
“Speculative development is proceeding only in select markets where customer demand is ongoing and market rents are above the rent needed to justify development risk,” she said. “While some tenants are renewing in place, others have outgrown existing facilities and are driving new leasing demand, dynamics we expect to continue into 2026.”
Prologis observed that new supply is at a decade low in 2026, with scarcity emerging in select size categories across key markets, with deliveries having seen sharp declines in recent quarters. It added that new U.S. deliveries came in at 50 million square-feet, coupled with new development starts down 71% from peak levels, based on industry estimates.
And with 2026 rent growth likely to accelerate in 2026, as vacancies decline and demand shifting to what the firm labeled a “higher gear, McLaughlin said that there are certain steps occupiers and lessors can take to secure space.
“Occupiers should view near-term leasing as an opportunity to secure availability and pricing ahead of further market tightening and rent increases,” she said. “This is especially important in space-constrained locations, where new development has been minimal and rents remain meaningfully discounted relative to historical levels.”
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