Prologis, the world’s largest warehouse company, has agreed to acquire Liberty Property Trust for $12.6bn in a deal that emphasises the robust demand for such properties in the eCommerce era.*
In an interview, Hamid Moghadam, Prologis chief executive, touted the acquisition as a way to strengthen the company’s presence in important US markets, including Pennsylvania, Houston and Orlando, at a time when high-quality warehouse space was becoming ever more scarce.
“We really believe that supply of high- quality industrial real estate is limited,” Mr Moghadam said. “It’s becoming increasingly difficult to zone land for commercial use, especially near large urban areas.”
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The all-stock deal includes the assumption of some debt, and has been approved by both boards of directors. Prologis eventually plans to shed about $3.5bn of warehouse and office properties it does not view as strategic. It also forecast $120m in cost savings.
The deal comes at a time when industrial warehouses — once a relative afterthought in the property industry — have become among its hottest investments due to the rise of eCommerce. As consumers demand ever-faster deliveries for a growing menu of items, state-of-the-art warehouses near big markets have become essential to retailers such as Amazon, Target and many others.
The warehouses are vital not only to make “last mile” deliveries but also to handle the huge volume of returns that are a part of online shopping.
“The increase in the value of advanced warehouse facilities mirrors the decline in the value of retail locations,” said Erik Gordon, a business professor at the University of Michigan.
“In a downturn, modern, well located warehouses are likely to outperform most forms of real estate.”
In June, Blackstone, the private equity group, acquired the US warehouses portfolio of GLP, another warehouse company, for $18.7bn. At the time, Ken Caplan, Blackstone’s co-head of real estate, called logistics “our highest conviction global investment theme today”.
