Tag Archive for: prologis report

Industrial Construction Reaches All-Time High, But Tenants Will Still Struggle to Find Space

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In Prologisā€™Ā recent third quarter earnings call, CEO Hamid Moghadam was blunt in his assessment of the industrial sectorā€™s supply-demand equilibrium:

ā€œWith vacancies at unprecedented lows, space in our markets is effectively sold out.ā€

It is, of course, little secret that industrial rents are at a premium and tenants are jockeying for what space they can find. But new details in Prologisā€™Ā Industrial Business Indicator report show just how much of an uphill climb supply will have before it meets current and future demand.

Prologis reports that construction starts have risen to an all time high of 120 million square feet, with speculative construction representing roughly 88% of all starts in the quarter. But pre-leasing has also reached its own record of 70%. That, coupled with construction delays, which are spreading out deliveries, means the risk of oversupply is low.

ā€œWe do not anticipate significant supply relief in most key locations; new supply is concentrated in low-barrier secondary and tertiary markets and the outlying submarkets of inland markets,ā€ Prologis Research said.

Indeed, it concludes that demand is set to outpace new supply through the near term. The reasons include the ongoing rise of e-commerce penetration and companiesā€™ move to build resilience into their supply chains. In addition, retail sales are robust, and trillions of dollars in pent-up savings and record-high consumer net worth should support future spending growth.

Prologis Research forecasts net absorption of 375 million square feet and deliveries of 285 million square feet for the full year.

ā€œLooking ahead, we expect that market conditions will remain exceptionally competitive for customers looking to expand, making it essential to plan early and move quickly.ā€

 

Source: GlobeSt.

Permanently Altered Industrial Sector Will Drive Demand For 4B SF: Prologis Report

TheĀ coronavirus pandemicĀ has reshaped the global logistics market in fundamental ways, spurring its long-term growth, but also putting new stress on the system as consumers adopt online retail sales more quickly than they might have otherwise,Ā according to a new reportĀ by industrial real estate giantĀ Prologis.

That could lead to demand for 4B SF of new logistics stock.

The report, “Forever Altered: The Future of Logistics Real Estate Demand,” said perhaps the main driving force in change for the industrial sector will be the accelerated growth inĀ e-commerce.Ā Though the pandemic will end, that will remain as one of its prime legacies.

E-commerce penetration will continue to be robust post-pandemic for a number of reasons. One is that many consumersĀ overcameĀ barriers to e-commerce during the pandemic, and they aren’t going back, the report says.

Also, innovation and supply chain investments made during the pandemic will hone the competitiveness of online options for retailers. That will be especially the case for retail segments with low e-commerce penetration before the pandemic, such asĀ groceryĀ retailers and home improvement specialists, Prologis predicts.

“Consumer expectations have increased in a permanent way,” the report notes. “Prologis Research forecasts that global e-commerce penetration will rise by 150 basis points a year over the next five years. Physical retail will increasingly require rapid replenishment operations to compete.”

Growth in consumption-oriented uses will drive growth inĀ logisticsĀ real estate, even as production-oriented uses decrease, Prologis also found. Consumption is now the main driver of demand for logistics space on the global level, with retail sales having a higher correlation with logistics demand growth than more traditional uses of such space, such as manufacturingĀ or wholesale trade.

These changes will naturally mean opportunity for industrial real estate owners and developers, but there will also be growth pains in logistics going forward.

“The resilience of the supply chain is being tested as companies expand globally, in turn driving the need for modern stock and decentralized networks,” the report notes. “Coupled with a rising consumer class, this worldwide upgrade should generate the need forĀ 3 toĀ 4BĀ SF or more of modern logistics stock over the next cycle.”

 

Source: Bisnow