Wednesday, June 08, 2011
Demand for logistics space is expected to accelerate over at least the next three quarters, according to the latest Prologis Industrial Business Indicator ("IBI") report. The IBI is a diffusion index that integrates customer-provided insights with key macroeconomic variables to measure and forecast business activity and industrial real estate demand.
"Our research indicates that there will be continued growth in global trade over the next two quarters," said David Twist, vice president, Research at Prologis. "The strong correlation between business activity and net absorption implies that demand for logistics space will also accelerate."
Key Findings
- The May 2011 IBI measures 56.9 for overall business activity
- The business activity index has indicated economic expansion for 21 consecutive months as the company's customers' businesses have been steadily improving since 2009
- The industrial space utilization index measures 55.4--the highest reading since April 2008
- Real inventory growth more than tripled between the fourth quarter of 2010 and the first quarter of 2011
- The current level of the space utilization index implies stronger inventory growth in the coming months
- The April 2011 IBI implies continued growth in trade over the next two quarters as cargo handling picks up in seaports and airports
- Net absorption has remained positive for three consecutive quarters, and the IBI's strong levels imply that absorption should accelerate in the coming quarters
Prologis collects data from a geographically-diverse set of warehousing and logistics customers across a range of business sectors. The IBI consists of an overall business activity index and a distribution space utilization index, tabulated for the company's markets and industry groups. The indices have averaged more than 350 participants per month. The findings indicate that the IBI is highly correlated with, and a leading indicator of, key macroeconomic variables. Of greatest significance, the IBI leads net industrial absorption by a quarter with a correlation of 97 percent, and seaborne container volumes by one month with a correlation of 85 percent.
Click here to download the complete report.
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