Subscribe to our free, weekly email newsletter!


Global logistics rents to grow more than 5 percent annually, says Prologis

By Patrick Burnson, Executive Editor
October 17, 2013

Prologis Inc., a leading global owner, operator and developer of industrial real estate, recently published an in-depth analysis of global rents for logistics facilities in a paper titled “Entering the Sweet Spot in the Cycle for Logistics Real Estate: An Extended Rental Rate Expansion.”

In the report, the company’s research team estimates overall rents will grow by more than 5 percent per year from 2014 to 2017, reaching a total increase of 20 to 25 percent during the four-year period. This outlook is supported by a trend in structural drivers and a recovery in operating fundamentals.

“Rents today still don’t broadly support new construction, but tightening vacancy rates are reversing that dynamic,” says Chris Caton, vice president and head, Prologis Research.  “In addition, as replacement costs rise with global economic expansion, we expect the rent required to justify new construction to rise in kind and lead to an extended period of pronounced rent increases, particularly in cyclical recovery global markets in the U.S. and Europe.”

Rent forecasting involves the consideration of many components, adds Caton. According to the report, rents in the largest markets – the U.S. and Europe – do not yet support broad based construction and rents will continue to increase.

Structural drivers such as construction costs, land values and cap rates must be weighed against cyclical vacancy trends to determine rent growth.

As replacement costs rise as the global economic expansion takes hold, Prologis expects the rent required to justify new construction to rise in kind. Caton said in an interview that supply chain managers may begin “locking in” long-term leases as a consequence.

“This dynamic should limit the pace of new development, leading to an extended period of pronounced rent increases, particularly in our cyclical recovery markets in the U.S. and Europe,” says Caton. 

Furthermore, Prologis expects stronger pricing power due to very tight operating metrics in China and a higher inflation factor in Brazil.

About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Shippers and other ocean cargo carrier stakeholders should be cheering the announcement made today by The U.S. Coast Guard, as it formally notified the International Maritime Organization through a Declaration of Equivalency that the United States position on SOLAS is that there are multiple methods to submit the combined cargo and container weight (Verified Gross Mass or VGM).

The proposed $4.8 billion acquisition of TNT Express N.V. by FedEx took a major step closer to becoming official today, with the company and TNT announcing today that they have received unconditional approval of the offer from the Ministry of Commerce People’s Republic of China (MOCFCOM).

March shipments at 798,180 trailed February by 12 percent and were down 19 percent annually. For the entire first quarter, shipments were relatively flat annually, rising 0.27 percent to 2,587,988.

OCEMA says it has placed a priority on working with other stakeholders to find operational solutions that will help U.S. exporters, carriers, and marine terminals prepare for the implementation of the SOLAS Verified Gross Mass (VGM) rule.

The first quarter is typically the slowest period of freight demand for LTL carriers. With a few notable exceptions, that was reflected in first quarter earnings reports of the major publicly held LTL carriers.

Article Topics

News · ProLogis · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2016 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA