Prologis describes logistics property transformation

logistics real estate

“The global pandemic has forever altered the logistics real estate landscape” according to real estate investment trust, Prologis. It is hardly surprising that a property developer specialising in logistics property might want people to get excited about logistics property, however, in this case, Prologis is probably correct.

In a report published a couple of weeks ago the company makes several useful points about the contemporary logistics economy. One of the most important of these is that “economic growth now requires more logistics real estate than in the past”. The reason for this is that discrete storage within shops has been replaced by explicit logistics activities within fulfilment centres, or in other words “e-commerce is more space-intensive”, which by this they mean is more warehouse space-intensive.

Prologis amplifies this idea by observing that “consumption-oriented uses have grown as a share of logistics demand, while production- and trade-oriented uses have decreased”. This is also important as it underlines that logistics is even more focused on the private consumer’s experience than in the past.

The San Francisco property developer also asserts that “location matters more than ever for logistics real estate customers. Supply chains are a key source of competitive advantage and will continue to drive financial performance”. Again, this is a powerful point. It is true that the scale and criticality of contemporary e-commerce logistics systems are less tolerant of sub-optimal locations. Therefore prices for the best warehouse locations will rise as “network planning decisions can yield revenue generation and cost control benefits that substantially outweigh real estate expenses, which represent just 5% of overall supply chain costs”. Whilst Prologis is, of course, keen to underline the worth of its own investments, there is a wider point about the increased importance of logistics management.

The market for logistics property has been highly dynamic over the past ten years but its future looks even more promising. What Prologis’ report underlines is that the whole sector is being restructured around new logistics imperatives and supply chain architectures. Executing this will be a significant investment opportunity.

Source: Transport Intelligence, April 1, 2021

Author: Thomas Cullen