US warehousing property appears to have legs as an investment and it is e-commerce that is driving demand.
Singaporean property company, Global Logistic Properties Limited (GLP) has made its second major investment into the US warehousing market with the purchase of US$1.1bn worth of facilities from the Hillwood Development Company, an investment vehicle controlled by Ross Perot. President and Chief Operating Officer of GLP US, Chuck Sullivan, commented that the “portfolio has a strong concentration in desirable locations expected to benefit strongly from the growth of e-commerce in the US”.
Although GLP makes its investments through a series of fund ‘platforms’ which are syndicated to outside investors, it intends to retain at least 10% of its own equity in this recent investment.
The Hillwood deal is the second major transaction for GLP in the US in just over a year. In 2015 the company spent US$4.6bn on a major portfolio of not dissimilar assets, notably 200 warehouses amounting to 5.4m sq m of space. They too were predominantly orientated towards the retailing sector.
The purchase in 2015 made GLP the second largest property owner in the US and today’s deal will only confirm that. Ironically the largest warehousing landlord in the US is Prologis which was formerly led by the late Jeffrey Schwartz, who went on to help found GLP. Prologis has also been investing aggressively in US warehousing, making a purchase of over $5bn in 2015.
What appears to be shaping the US warehousing market is the need for large fulfilment centres for e-commerce and the consequent knock-on effects for smaller facilities and transhipment centres. This represents a strategic reshaping of warehousing provision with the qualitative change in facility accentuating the wider increase in volume. For the right property occupancy rates are high and rents are rising. The assumption is that this trend will increase and the market will struggle to provide sufficient capacity. As a consequence, major players are investing heavily.
If this brief has been of interest, you might also like to download Ti’s new report Global Warehousing & Logistics Networks 2016. This report examines the shifting landscape of supply chain real estate and the changing patterns of distribution on a global basis.
Source: Transport Intelligence, September 14, 2016
Author: Thomas Cullen