Prologis anticipates uptick in vacancy in 2023

Industrial real estate investment trust Prologis Inc. anticipates an increase in vacancies in 2023, with macroeconomic concerns likely to dampen demand.

The San Francisco-based company projects US market vacancy rates will climb to low 4% towards the end of the year from 3.5% currently, before settling back to mid-3% by late 2024.

"[T]he macroeconomic picture continues to be a concern, and we anticipate it could weigh on customer sentiment over the balance of the year, translating to some demand that could be delayed into 2024," Prologis CFO Timothy Arndt said during the REIT's first-quarter earnings call April 18. "However, this will overlap with the slowdown of new deliveries, creating a sustained dynamic for high occupancy and continued rent growth into next year."

The REIT expects the industry to deliver 445 million square feet of industrial space in 2023, and then fall by half or more into 2024.

Prologis posted $463.2 million net earnings attributable to common stockholders, or 50 cents per share, in the first quarter, from $1.15 billion or $1.54 per share recorded in the same quarter a year ago. Average occupancy in the first quarter stood at 98%.