Supply-demand imbalances continue to be a key theme in major logistics markets across the globe. Demand conditions remain robust across all three regions, with the U.S. registering its second highest ever quarter of leasing activity in Q1. Vacancy remains at all-time lows in the U.S. and Europe amid persistently elevated levels of demand. Vacancy rates in larger, more mature Asian markets such as Hong Kong, Tokyo and Seoul are comparable to the extremely tight conditions seen in the U.S. and Europe. 

Despite construction pipelines being at record highs, such is the level of demand that new projects cannot come online fast enough. Given these supply and demand dynamics, all three regions registered strong rental growth in Q1. While the record volume of space under construction could help alleviate strain in some markets, those with extremely low vacancy are likely to continue to experience upward pressure on rents. Moreover, an increasing number of core markets are contending with severe supply constraints from a scarcity of land, which is pushing up land values.

Future trends: Further scrutiny of supply networks is anticipated

Outlook for 2022: Supply will struggle to match the strength of demand pushing rents up in the near term, with those looking to sign new leases facing steeper annual rental escalations and minimal concessions. Meanwhile, ongoing supply chain disruptions, elevated inflation and labor shortages are adding to occupiers’ costs. This challenging environment will impact overall budgets for tenants and affect locational decisions.

Long-term: Recent global events have again stressed the need for supply chain safeguards and this will lead to further scrutiny of supply networks. While there has been increased commentary around deglobalization, it is too soon to say whether this will actually play out, and if so, how this would affect global supply networks. Nevertheless, going forward, reshoring or nearshoring is anticipated to increase, and this is likely to add to ongoing long-term structural drivers to boost demand for space. Availability of land for development will remain an enduring challenge.