Prologis Warehouse Rents Jump as Space Remains Tight
April 19 2016 - 1:30PM
Dow Jones News
By Robbie Whelan
Prologis Inc., the largest owner of warehouses and distribution
centers, reported a record increase in rents in the first quarter,
gains the company attributes to limiting new construction despite
rising demand.
The company expects to cut its 2016 construction budget to just
over $2 billion, lower than last year, even as vacancy rates
approach all-time lows, Chief Executive Hamid Moghadam said in an
interview.
As a result, rents on lease renewals jumped 20.1% in first three
months of the year, "the best numbers we've ever seen," he said.
Occupancy rates at Prologis facilities rose to 96.1% at the end of
March, though customer retention slipped to 84.4%, from 86.3%.
"What's the point of building a ton of properties and weakening
the market?" he said. "People are really worried about getting over
their skis, so they're being much more measured in what they
build."
This month, the real-estate brokerage CBRE Group Inc. reported
that only 9.2% of warehouse space was available for leasing in the
first quarter, down 0.2 percentage points and the 24th straight
quarter of tightening occupancy in the market.
Prologis started development work on $193 million worth of
projects in the first quarter. Mr. Moghadam said he thinks demand
for warehouse space is only at about 75% of level seen at the top
of the last market in 2007, and said he expects rents to grow
further in 2016.
"Tenants have had a great bargain for a long time, and only now
are starting to pay reasonable rates," he said.
Prologis' net earnings per diluted share narrowed from $0.65 in
the first quarter of 2015 to $0.39 in the first quarter of 2016,
the company reported Tuesday. Mr. Moghadam said that last year's
first-quarter earnings were boosted by the sale of a 56-acre
Silicon Valley industrial park to Facebook, Inc.
Prologis shares were up 0.5% at $45.33 early Tuesday afternoon
in New York.
Write to Robbie Whelan at robbie.whelan@wsj.com
(END) Dow Jones Newswires
April 19, 2016 13:15 ET (17:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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