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

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

Seasonally-adjusted (SA) for-hire truck tonnage in October at 135.7 (2000=100) was up 1.9 percent compared to September’s 133.1, and the ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment was 139.8 in October, which was 0.9 percent ahead of September.

The average price per gallon of diesel gasoline fell 3.7 cents to $2.445 per gallon, according to data issued today by the Department of Energy’s Energy Information Administration (EIA). This marks the lowest weekly price for diesel since June 1, 2009, when it was at $2.352 per gallon.

In its report, entitled “Grey is the new Black,” JLL takes a close look at supply chain-related trends that can influence retailers’ approaches to Black Friday.

This year, it's all about the digital supply network. In this virtual conference, we will define the challenges currently facing supply chain organizations and offer solutions designed to transform linear operations into dynamic, automated networks that offer seamless communication, visibility, and the ability to respond and optimize processes at any given time.

In his opening comments assessing the economy at last week’s RailTrends conference hosted by Progressive Railroading magazine and independent railroad analyst Tony Hatch, FTR Senior analyst Larry Gross said the economy continues to slog ahead at a relatively tepid pace, coupled with some volatility in terms of overall GDP growth. And amid that slogging, Gross said there is currently an economic hand-off occurring between the industrial sector and the consumer sector.

Article Topics

News · ProLogis · All topics


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

© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA