Decline in Warehouse Utilization Signals Economic Uncertainty

In November 2023, warehouse utilization experienced its first contraction in the history of the Logistics Manager’s Index (LMI). This development reflects broader economic trends, including weakening consumer demand and shifts in manufacturing practices, which have led companies to stock fewer goods than in previous months. The focus has shifted towards emptying existing inventories, resulting in elevated warehousing vacancy rates.

Impact of Consumer Demand on Warehousing

The softening of consumer demand is a critical factor influencing the current state of warehousing and manufacturing. Companies are increasingly concentrating on clearing out their warehouses rather than replenishing them, a strategy reflected in the declining LMI, which fell from 59.2 in the third quarter of 2025 to 57.4. This marks the lowest level since March 2025. Consequently, the need for warehousing space has diminished, particularly as the manufacturing sector itself remains weak.

Warehouse utilization reached 65.3 in September, the highest in over a year, but the overall capacity has balanced out at 51.6. Despite higher operating costs compared to pre-2023 levels, the industry is transitioning from an expansion-focused approach to one emphasizing efficiency and flexibility. Businesses are adapting inventory levels to more agile, cycle-based strategies, influenced in part by ongoing tariff uncertainties that impact logistics decisions.

Transportation and Logistics Market Trends

The logistics industry is witnessing changes beyond warehousing. Transportation capacity fell by 2.2 points to 55.1, while transportation utilization dipped to 55.0, both metrics indicating a trend towards normalization rather than growth. September's eight-year average for transportation utilization was 65.1, underscoring the current downturn.

In parallel, the Producer Price Index (PPI) has trended downward from 156.7 in June, marking the third consecutive month of easing. This suggests a period of controlled momentum within the logistics sector during the third quarter of 2025, a time seen as a turning point for the industry.

Vacancy Rates and Space Efficiency

National vacancy rates remain high, yet they mask a shortage of functional space available for use. As companies pivot to agility-based inventory strategies, the logistics market is increasingly prioritizing sustainability over scale. This shift is also reflected in the normalization phase of warehousing prices. Despite this, certain regions, such as Dallas-Fort Worth, Columbus, and Indianapolis, continue to exhibit strong warehouse utilization.

This strategic pivot highlights the industry's entrance into a phase of controlled momentum, where companies are more focused on maintaining balance and efficiency rather than sheer expansion. The balance in warehouse capacity at 51.6 indicates an equilibrium between space availability and demand, necessitating a careful approach to inventory management and logistics planning.

Outlook for the Logistics Sector

As the logistics industry navigates these changes, businesses are adopting new strategies to cope with the evolving economic landscape. The shift to agility-based inventory management is a response to both internal and external pressures, including fluctuating consumer demand and tariff policies.

Overall, the transition witnessed in the third quarter of 2025 suggests a recalibration of the logistics market, as companies adapt to new realities and prioritize sustainable practices. The normalization of warehousing prices and the balance in capacity utilization are indicative of this shift, promising a more resilient and adaptable industry moving forward.

“The logistics market is entering a phase of controlled momentum, focusing on sustainability and efficiency over traditional expansion metrics.”

As businesses continue to adjust their strategies in response to these challenges, the logistics industry is poised to evolve, potentially reshaping the landscape of warehousing and transportation in the years to come.