Prologis IBI signals slowing activity amid trade policy volatility, but utilization edges up

Ongoing market uncertainty, largely related to tariffs and trade policy, continues to have a sizable impact on the industrial real estate sector, according to the new edition of the Industrial Business Indicator (IBI), which was recently issued by San Francisco-based real estate investment trust company Prologis.

Prologis defines the IBI as a survey of customer sentiment focused on customer activity in warehousing. The April IBI Active Index reading came in at 54.4 (a reading of 50 or higher indicates growth is occurring), following a 58.4 first quarter reading and 19 months in the high 50s and low 60s range. And the IBI Utilization rate headed up to 85.1, after a collective 84.6 reading over February and March.  

“The IBI Activity Index reveals broader macro volatility and uncertainty,” said Prologis. “While typically any reading greater than 50 signals growth, this drop represents a slowdown in a difficult planning environment. The IBI has been an excellent indicator of economic conditions in the past, and we’re keeping an eye out for further deceleration. However, context matters—we’re cautious about overinterpreting one month’s reading in this new environment. Front-loading, rerouting, order cancellations and consumer pre-buying behaviors could all produce choppy IBI readings in the coming months.

As for the increase in the utilization rate, Prologis noted that despite imports at near-record levels in 2024, healthy retail sales, lean inventory practices, and spare capacity in some warehouses kept utilization lower than normal, at 84.5. And from February to April of this year, it observed that the utilization rate has been steadily climbing, “as customer businesses continue to grow, import growth remained strong, and trade volatility incentivized some customers to add to inventories ahead of potential changes in the cost of goods sold.

In an interview with LM, Melinda McLaughlin, Senior Vice President, Global Head of Research, for Prologis, explained that sector activity has been very good overall.

“That began really in late 2024 but through 2025 after some auditing, some due diligence on the supply chain, retailers, wholesalers, everyone involved in the supply chain was starting again to stock up,” she said. “There was definitely some evidence of front-loading in the activity number. So, imports are coming in at a double-digit, year-over-year growth rate through April. Consumer sales were solid, not slow by any means, but things were really paced by restocking activity, which you see in the utilization number, which remains sort of below normal. And what that means is two things. One is that retailers in particular, have been taking a cautious stance on inventories. I think everybody remembers the shortages from the pandemic led to sort of, ‘give me double what I normally would order,’ and some of that inventory was a little slow to then move off the shelves. It's the bullwhip effect, and it is pretty common in supply chains. But I think that experience meant retailers in particular were keeping inventories lean.”

She added that left inventory-to-sales ratios being around 3%-to-4% below pre-pandemic 2019 levels, describing as leaner than normal, coupled with some excess supply chain space in the market. Due to pandemic-driven shortages—and also the need to accommodate inventory growth and a real scarcity out in the market—she said that some companies may have overextended, particularly in very low-vacancy markets like Southern California, and now may have 5%-to-10% of space that is a little bit idle.

“Those factors together mean that the IBI utilization rate—in which a normal range for economic expansion is around 85-to-86—has been hovering in the 84-to-85 range, with the latest reading at 85.1. That shows that there is a little bit of room to go, but it is showing that restocking and getting inventories in alongside that kind of robust activity reading, with supply chains being active heading into this, when that data was collected in early April.”