Chris Caton, global head of research at Prologis Inc. (NYSE: PLD), joined REIT.com for a video interview at REITWeek 2016: NAREIT’s Investor Forum at the Waldorf Astoria New York.
Prologis owns and operates industrial real estate focused on global and regional markets across the Americas, Europe and Asia.
Caton addressed the reasons why there has been such a strong market for industrial real estate.
“It’s a combination of demand exceeding what many expected, what the economy should have generated, as well as supply being measured over the course of these years,” he responded.
The reasons for the measured supply response are varied, Caton said. Some of it is cyclical, some of it is because rents didn’t justify new development, and some of it is structural, he explained.
Caton noted that the industrial real estate business today is much more institutional; the top 20 players have developed more than half of the product during the last three to four years, he said. At the same time, the types of risk those organizations will take is much more considered than in prior cycles, he added.
Other impediments to supply include the fact that industrial buildings today are increasingly complex and greater in scale, Caton noted, while municipalities are also taking a smart growth approach to zoning.
Caton also said he thinks the e-commerce impact still has room to run. “I see us in the early innings,” he said.