Mizuho’s Vikram Malhotra Sees Logistics Real Estate in Early Stages of New Upcycle

Vikram Malhotra outlines a fresh logistics upcycle powered by AI‑driven e‑commerce growth. Every incremental dollar of online sales translates into three to four square feet of warehouse space, accelerating demand for massive "big‑box" facilities over 500,000 sq ft. Tenants such as Walmart, Amazon, Home Depot and Target are expanding to meet one‑hour delivery expectations, keeping the sector bullish despite geopolitical volatility. This surge aligns with a broader industrial REIT narrative that emphasizes scale, speed, and technology as core value drivers.

Supply remains the primary headwind. U.S. logistics vacancy hovers around 7.5%, and analysts argue that a dip to roughly 6% is needed before rent growth can accelerate meaningfully. New starts have collapsed by 60‑70% while demand fell even steeper, creating a tight pipeline that favors landlords with existing inventory. Geographic nuances are evident: the Sunbelt and Midwest are seeing robust absorption, fueled by reshoring and T+1 inventory strategies, whereas Southern California lags behind its northern counterpart. Data‑center adjacent leasing now accounts for about 10% of quarterly volume, adding another layer of demand to the industrial market.

Design and operational shifts are reshaping warehouse formats. Last‑mile fulfillment pushes developers toward smaller, 100‑200k sq ft sites near population centers, while reshoring of critical components drives interest in larger 300‑500k sq ft footprints equipped for automation. Currently only 5% of U.S. warehouses are fully automated, but rising power requirements—five to seven times higher per square foot—make electricity access a decisive competitive factor. Facilities that combine optimal location, high clear heights, robust power infrastructure, and AI‑enabled automation are poised to command premium rents and deliver stronger equity multiples for investors.