‘Recovery Continues for Logistics Real Estate’

September 12, 2011 / Elizabeth Buckley, Commercial Property Analyst

Recovery in production, trade and inventories is gradually gaining strength as a positive net absorption globally is expected to rise to 400 million square feet next year.

‘Recovery Continues for Logistics Real Estate’

This was according to Prologis, Inc. (NYSE: PLD), an operator and developer of global industrial real estate, which announced the release of a research paper titled “Logistics Real Estate on Track for Continued Rebound.”

The paper provides an update on the leading indicators of demand for logistics real estate and concludes a recovery is underway in production, trade and inventories.

Meanwhile, Grubb & Ellis reported previously that logistics real estate has been primarily driven by international trade and movement of goods over the past 10 years as large warehouse and distribution buildings sprouted along the coasts near sea ports handling inbound containerized cargo flows as well as inland near intermodal rail yards facilitating the transfer of goods to end consumers.

Other key findings of the study indicated the need for inventories to grow faster – from unsustainable and near-record lows — in order to keep pace in the second half of 2011, with U.S. trade and consumption past prior peak levels.

The study expressed lesser optimism on inventories returning to their pre-recession levels, though “they are now below where the economy and consumption would warrant.”

Additionally, Prologis expected a continued demand for logistics real estate and for net absorption as a percent of stock to surpass its pre-crisis peak level in 2012.

“The recession has been deeper and the recovery has been slower than anticipated, however, the global economy and the logistics real estate market are on track for a stronger rebound in the second half of 2011,” said David Twist, vice president, Prologis Research.

“We expect to see increased demand for modern logistics space over the next 12 to 18 months.”

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