05/12/2022 | by

Surging demand and limited supply are boosting rents for Prologis, Inc. (NYSE:PLD), with the logistics REIT’s U.S. portfolio almost 50% under rented at this time.

Speaking May 12 on CNBC’s Evolve livestream program, Hamid Moghadam, Prologis co-founder, chairman, and CEO, said that “even if rents go nowhere from here, they just roll over, we can capture about 50% upside in our rent rolls.” At the same time, construction costs are “going through the roof.” He noted that trends so far are not conducive to additional supply, in fact “they’re going the other way.”

Moghadam also said it will be some time before supply chain issues get back to normal, adding that “any kind of disruption ultimately creates more demand for warehouse space.”

Other observations from the interview include:

  • Land prices in the U.S. are getting to the point where “intensification of sites is a real possibility in major urban areas.” Moghadam noted that after building the first multistory facility in Seattle a few years ago, Prologis is looking at additional opportunities in the U.S. Almost every Prologis building in Japan and most of its buildings in China are multistory, he said. “That’s the only solution.”
  • Prologis began to address customer concerns about the availability of labor several years ago, creating a Community Workforce Initiative to train workers in logistics skills. The goal is to train 25,000 people by 2025, with 13,000 already trained.
  • By getting closer to its customers, Prologis has a better understanding of their other needs in areas such as energy, mobility, and fleet electrification. “That’s going to be a huge engine for our growth going forward.” Prologis has started an EV charging business because long-distance trucking and delivery vans will go electric, Moghadam said.
  • Regarding Prologis’ offer to acquire Duke Realty Corp. (NYSE: DRE), Moghadam said “either way, it’s going to work out great for our shareholders.”

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