Prologis CEO: Capital is not an issue, it’s finding properties

Hamid Moghadam said supply is tight, but predicts “double the demand” for logistics centers in coming years

National /
Jul.July 30, 2020 07:30 AM
Hamid Moghadam (iStock)

Hamid Moghadam (iStock)

The onset of the coronavirus wreaked havoc on company supply-chains across the country, a fact that will likely benefit industrial real estate owners in the long-run.

“Supply chains are going from just-in-time strategies to just-in-case strategies,” said Prologis CEO Hamid Moghadam, at a Wednesday webinar hosted by NYU’s Schack Institute of Real Estate. “Bottom line, I wouldn’t be surprised if after this people will carry 5 or 10 percent more inventory than before this, regardless of e-commerce. And that will double the demand for the growth rate for logistics facilities.”

As one of the largest industrial developers and investors, Prologis has weathered the pandemic far better than most companies.

Riding a wave of demand for warehouse and distribution centers, Moghadam noted that the real estate investment trust reported higher-than-expected rent collections for the most recent quarter and has readjusted earnings guidance to pre-coronavirus projections.

During the webinar, Moghadam even found time to joke.

“The killer risk is the transporter from ‘Star Trek,’” he said, referring to the teleportation machine. “If someone invents that we are toast.”

Blackstone has begun encroaching on its space with big investments and deals, but Prologis is still an industrial real estate giant. The REIT owns 963 million square feet of industrial space — up from around 800 million square feet at the end of 2019 — and 4,655 buildings across the country. The San Francisco-based company has $136 billion in assets under management and has leases with giants like Amazon, FedEx and Home Depot.

Moghadam said the company “has always been flush with capital” and has not had to raise money in public equity markets “in almost forever.”

The scarcity, he said, is finding a place to build. Buildable land in large U.S. cities is increasingly rare and local governments are growing more wary of new industrial development, he said. That hinders expansion plans.

“It’s very hard to find a 50-acre site to service the needs of the customers,” Moghadam said.

Constrained supply will keep vacancy rates down, he said, noting they were under 4 percent companywide. Another benefit, he added, is little threat of oversupply in metro areas, which typically serve as last-mile locations.

Schack Institute dean Sam Chandan introduced Moghadam, who spoke with Schack REIT Center director Scott Robinson; and with attorneys Adam Emmerich and Robin Panovka of New York-based Wachtell, Lipton, Rosen & Katz.

Moghadam said he does not see much opportunity in repurposing struggling retail centers into industrial facilities because of the strict contracts that generally prevent it.

As a property owner, he said, “the last thing you want to do is to give that as an excuse to the two anchors who are not doing well to walk away from the lease because you converted the third anchor to an industrial or logistics box.” A study by CBRE did find about two dozen instances of companies, including Amazon, repurposing retail stores and malls into warehouses, CNBC reported last year.

Moghadam added he is not worried about the trade tensions between the U.S. and China.

“Don’t listen to the politicians, look at the numbers,” he said. “We cannot produce all these things that we are depending on other countries to produce.” Should manufacturing return in a major way to the U.S., he said, the company would benefit from that, too.

“I honestly don’t care where stuff is made,” he said. “I care where stuff is consumed, and stuff is consumed in these major areas where people live and where they have money in their pockets.”


Related Articles

arrow_forward_ios
Jeff Bezos (Getty, Amazon/Illustration by Alexis Manrodt for The Real Deal)
Amazon’s real estate footprint ballooned in 2020
Amazon’s real estate footprint ballooned in 2020
Amazon founder Jeff Bezos with his Beverly Hills estate, 5 Manhattan West and 212 Fifth Avenue (Photos via Getty; Pinterest; Wikipedia Commons; City Realty)
Jeff Bezos, who turned real estate upside down, quits
Jeff Bezos, who turned real estate upside down, quits
Renderings of Amazon HQ2 and Amazon CEO Jeff Bezos (Photos via NBBJ/Getty)
Amazon unveils woodsy plans for HQ2
Amazon unveils woodsy plans for HQ2
China’s domestic housing sector was entering bubble territory last summer. (Getty)
Beijing may have slowed housing bubble — for now
Beijing may have slowed housing bubble — for now
Amazon CEO Jeff Bezos (Getty; iStock)
Amazon to put $2B into affordable housing
Amazon to put $2B into affordable housing
(iStock)
China limits property loans to curb housing bubble
China limits property loans to curb housing bubble
Amazon's Jeff Bezos, Google's Sundar Pichai and Facebook's Mark Zuckerberg (Getty, iStock)
Tech giants occupy nearly 600M-sf of US real estate
Tech giants occupy nearly 600M-sf of US real estate
Prologis CEO Hamid Moghadam and Liberty Property Trust CEO Bill Hankowsky (Credit: Prologis, B.PHL, iStock)
Prologis to buy rival logistics firm for $13B
Prologis to buy rival logistics firm for $13B
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...