Blackstone’s warehouse play challenges Prologis’ claim to the throne

Financial giant’s portfolio nips at the heels of longtime industry leader

From left: Prologis CEO Hamid R. Moghadam and Blackstone's Jon Gray
From left: Prologis CEO Hamid R. Moghadam and Blackstone's Jon Gray

Long before windowless warehouses became a sexier investment than luxury condos, Prologis was king.

The San Francisco-based company bought up millions of square feet of industrial properties and built out a crack team of executives to run it – a platform that served the company well when the sector exploded thanks to e-commerce. But the industry leader’s claim to the throne is being challenged as the Blackstone Group, the world’s largest alternative asset manager, makes warehouse real estate a cornerstone of its global investment strategy.

“Prologis had that kind of exposure to industrial even at a time when Blackstone owned nothing,” said Dave Roders, an analyst at Robert W. Baird & Co. who covers Prologis. “Lately though, Blackstone’s appetite and consumption of industrial assets has probably outpaced what [Prologis] has done.”

Prologis, the real estate investment trust with a market capitalization north of $61 billion, has a portfolio that spans nearly 814 million square feet (including 61 million square feet of development projects) at the end of last year, according to the company’s most recent earnings statement.

Blackstone, meanwhile, has grown its portfolio to approximately 800 million square feet, a spokesperson for the company told The Real Deal. (Blackstone doesn’t publicly report its square footage figures.)

While Blackstone is on track to surpass its rival, it’s playing catch up in terms of competing with Prologis’ decades’ worth of management experience.

Eric Frankel, an analyst at Green Street Advisors who covers Prologis, said it’s not easy to build out an operating platform that’s both effective and efficient in any sector, let alone in industrial.

“Prologis obviously has a head start with its experience and operating infrastructure,” he said.

Size is everything in this game

Blackstone and Prologis made headlines last year as they inked the biggest deals in the logistics space, which has become one of the hottest investment areas in real estate thanks to booming demand driven largely by the explosion in e-commerce.

In fact, Blackstone made the biggest real estate deal across the globe last year when it paid $18.7 billion to buy the Singaporean international warehouse firm GLP and its 179 million-square-foot portfolio. Blackstone also inked a deal to buy a portfolio of 60 million square feet from Colony Capital for $5.7 billion.

Prologis, meanwhile, recently completed a $12.6 billion acquisition of Liberty Property Trust, gaining control of its 107 million-square-foot warehouse portfolio.

“When you see the top five deals of last year, Blackstone got three and Prologis got the other two,” said Craig Meyer of JLL, head of the brokerage’s industrial practice.

Prologis CEO Hamid Moghadam founded the predecessor to his company in 1983, but the modern iteration of Prologis was formed in 2011 out of the company’s merger with AMB Property Corporation, combining the country’s two biggest warehouse companies.

Blackstone started out in the warehouse space in 2010 when it created the warehouse subsidiary IndCor. It sold that business in 2014 to the Singapore sovereign wealth fund GIC for $8.1 billion and stayed away from warehouses for two years before jumping back into the space in 2016 with the $1.5 billion purchase of a 12 million-square-foot West Coast portfolio from LBA Realty.

Sign Up for the undefined Newsletter

Prologis, meanwhile, has seen its stock price climb by more than 40 percent from its peak before the recession to roughly $93 per share, thanks in part to its development project and demand big tenants like Amazon, FedEx and Home Depot.

Combined, Prologis and Blackstone today own about 1.6 billion square feet of warehouses internationally. But despite their dominance at the top of the sector, the industrial space remains highly fragmented. In the United States alone, there was about 14 billion square feet of industrial space as of late last year, according to JLL. Globally, the scale is many multiples of that.

“When you think about the players beyond Prologis and Blackstone, there are a number of other very large institutional players,” said Craig Mailman, an equity research analyst at KeyBanc Capital Markets. “It’s not just these two and then nobody else. There are plenty of well capitalized investors out there searching for industrial real estate.”

Other large players in the space include Duke Realty, which owns about 155 million square feet and has a market cap of $13.4 billion. Privately held companies with large portfolios include Exeter Property Group, which owns about 200 million square feet, and Cabot Properties, which has about 181 million square feet.

Those companies could either be competitors for Prologis and Blackstone, or potential acquisitions.

Building an exec team

Blackstone CEO Jonathan Gray identified warehouses as one of the key areas where the company has “real conviction in” to add value, especially as economic growth has been sluggish.

“We bought more than a billion square feet around the world over the last nine years, and we continue to like that area….” he said during the company’s earnings call in October.

Blackstone has always touted its size and scale as one of its key strengths, and the company’s made moves to build up its expertise in the warehouse business.

Link Industrial Properties, the company Blackstone launched in 2019 to operate its warehouses, is led by CEO Benjamin Harris, who had been the president of Gramercy Property Trust, the 81 million-square-foot warehouse REIT blackstone acquired for $7.6 billion in 2018.

In December, Link hired as chief financial officer Matt Ostrower, who had been the CFO at the shopping center REITs SITE Centers and Equity One.

And in January, the company brought on board member Phil Hawkins, who had previously been a board member at Prologis and before that was president and CEO of DCT Industrial for more than a decade.

One task on the Link team’s plate will be to sort through Blackstone’s recent acquisitions. Both Blackstone and Prologis are likely to look through the big portfolios they bought and sell off certain properties, such as those that overlap their current holdings in individual markets.

JLL’s Meyer said they both are active in recycling capital, which means selling off improved properties and buying new ones.

“I think with both of them, you’re going to look to see second and third generation plays,” he said.

Contact Rich Bockmann at or 212-673-5081.