Prologis Inc. PLD recently issued a business update and discussed its views of the logistics market in light of the coronavirus pandemic. Per management, logistic real estate is likely to benefit because following the coronavirus crisis, businesses will likely operate with increased level of inventories.
Chris Caton, SVP, Global Strategy and Analytics, said,“We anticipate that all customers will tune their supply chains for resilience versus efficiency — five to 10 percent more inventories will translate to real demand for logistics real estate.”
Apart from the projected increase in inventory levels, demand is also likely to grow on fast adoption of e-commerce. In fact, the company noted that lease signings increased 16% year on year in March and two-thirds of this activity occurred in the second half of the month. E-commerce has been the driving force behind leasing activity, with its share being roughly 40%.
Also, Caton noted, “We are seeing the majority of our customer industries resilient or growing during the coronavirus outbreak.” He further noted that “The consequences of the recession will lead to lower demand for our industry, but it will be temporary and last perhaps six months.”
Amid e-commerce boom and supply-chain strategy transformations, demand for industrial real estate has been healthy. Although the overall impact from the coronavirus pandemic is yet to be seen, warehouse operations have become more essential, with quarantines resulting in more e-commerce customers. This opens up prospects for Prologis and other industrial REITs, including Terreno Realty Corporation TRNO, Duke Realty Corp. DRE, and Rexford Industrial Realty, Inc. REXR.
Currently, Prologis and all above-mentioned stocks carry a Zacks Rank #3 (Hold). Here is the performance of the stocks so far in the year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Prologis, Inc. (PLD) : Free Stock Analysis Report
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