| Large companies are much more active than small ones in demanding space (though small and midsize-company demand has been growing for the past four quarters). What's driving large requirements? (Other than 3PLs—get it?) |
| Yesterday, Prologis Americas CEO Gene Reilly told us e-commerce and 3PLs are driving demand. Food and beverage continues to grow among Prologis' tenants because it's relatively recession proof (polar bears will always need Coca-Cola). And it's not just Amazon pulling the wagon: Prologis just signed a 1M SF build-to-suit (in Atlanta) for a Home Depot distribution center for online orders. Gene says there have been nine quarters of positive absorption nationally, owing to no new supply. |
| Gene tells us a big focus after Prologis and AMB's '09 merger was G&A efficiencies. Originally targeted to save $80M a year, the firm's annual savings blimped to $115M (start prepping those "Gene for President" pins). As for the company's portfolio, Prologis is selling out of non-core markets like Tampa and Minneapolis, though best-in-class properties are worth consideration holding on to. The goal is for 90% of the company's portfolio to be in global markets (big port or airport). Immediately after the merger, 78% of it was in global markets; now it's 81%. |
| East region head Jay Cornforth has good news: Baltimore has a 50-foot channel (most boats coming through the widened Panama Canal will want at least a 48-foot depth). The bad news: The post-Panamax ships will be container ships, while Baltimore is mostly a bulk port (specializing in agriculture and cars). More good news: It's hard to develop industrial in Baltimore, so supply has remained in check. More bad news: Sequestration makes demand in this government-weighted market uncertain. So would Prologis buy port parcels in Baltimore? Jay says yes. The company doesn't shy away from brownfield sites, as evidenced by its Jersey City, NJ, formerly maritime-zoned site that took five years to prep. A note of caution: Prologis won't buy until the right zoning is in place. |
WHAT'S DRIVING INDUSTRIAL
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