Last year at this time the big question was – will Christmas be canceled? After more than two years of supply chain disruptions, the word "normal" is creeping into the outlook for 2023. At the same time, the larger economic environment is still impacting major supply chain players.

 We still see companies struggling with labor shortages and needing to prepare for the unexpected (moving from a "just-in-time" approach to managing their supply chain to a "just-in-case" approach). While no one has a crystal ball, we at Prologis have leveraged our company's decades of industry experience and unique insights from our ~1.2 billion square foot global portfolio and 6,200+ customers to predict seven unconventional trends for the industrial real estate market and wider macro-economy for the new year:

Prediction #1: U.S. warehouse development starts will drop to a seven-year low, even as rent growth exceeds 10%.  Driven by a rapid rise in the cost of capital, development starts will decline by 60% to less than 175 million square feet (MSF) in 2023. A pullback of this magnitude would create a shortage of space in 2024. Low vacancy will produce another year of double-digit rent growth. With less warehouse space coming online in the near future, consumers may feel higher costs as retailers are forced to accept the dynamics of supply when chasing limited demand.