In reviewing our bold predictions for 2023, key themes played out. Development moderated from tightening regulatory landscapes, cap rate expansion and high construction costs. Nearshoring and sustainability requirements met the upswing we anticipated. E-commerce recovered, although it did not translate to leasing outperformance. Prologis Research continues to leverage decades of industry experience and proprietary data, as well as unique insights from the real estate sector to provide the following seven supply chain predictions for 2024.

Trend 1: The global freight recession will reverse
Signified by double-digit growth in port and truck traffic, the global freight recession is expected to reverse.

Trend 2: The Great Construction Bust will intensify
Construction costs rose by 5-10% during 2023 in most geographies, with an exception in Europe. In 2023, spec development starts are down more than 50% globally. The great construction bust will intensify, with global starts hitting the lowest level since the 2008 financial crisis.

Trend 3: Latin America rents will grow at more than double the global average
Latin America has experienced record demand and this will continue into 2024. However, vacancy rates are below 2% in Mexico and forecasted to remain tight throughout 2024, meaning customers will have to compete for limited space. 

Trend 4: Annual demand in China will reach the second-highest level on record
Net absorption in China will reach the second highest level on record, helping to work through excess supply from the past few years. Fiscal and monetary policy will further ease in 2024, providing demand- and supply-side incentives to emerging technologies, such as new energy vehicles (NEVs) and charging stations, renewable energy and chipmaking capabilities. 

Trend 5: Technology, especially artificial intelligence, will drive up energy requirements in logistics facilities
The need for additional technologies, such as charging stations for electric vehicles or robots in logistics facilities, is increasing – and with it the demand for energy. This will favour the demand for solar energy. Solar energy is key for sustainable power generation. Costs are economically feasible. Government incentives can fast-track adoption.

Trend 6: Interest rate declines will double private equity real estate funding in 2024
Our projections take the bull case on interest rate cuts. Institutional dry powder is waiting on the sidelines, and interest rate declines in the second half of the year will unlock entry into the market as the capital markets cycle begins to turn.

Trend 7: Cap rate movements will reverse
U.S. and European cap rates will compress while the expansion rotates to Asia.

You can find a detailed overview of the seven forecasts for 2024 here.