ProLogis (PLD), a leading global provider of distribution facilities, recently signed two new lease agreements spanning about 416,000 square feet of its newly developed distribution facility in Toronto, Canada. The continued leasing activities in the region show signs of stability in the industrial property market in North America after a prolonged recession that pushed back the sector.
 
About 245,000 square feet were leased to an unnamed premier global consumer packaging company, while 171,000 square feet of space were leased to Emerson Canada, a division of the global manufacturing and technology company Emerson Electric Co. (EMR).
 
The lessees will occupy the space at ProLogis Park Bolton, which is located in close proximity to a highway network facilitating the distribution needs of the Greater Toronto Area and Eastern Canada. The leased property has all the state-of-the-art facilities, and includes various sustainable design and energy-efficient construction techniques. Consequently, the leased site offers a huge growth potential to the lessees. 
 
With improving property values and growing institutional demand for quality properties, ProLogis has witnessed a growing customer interest in new build-to-suit development projects across the globe. In addition, leasing decisions that were earlier postponed due to volatility in the markets are gradually coming off the shelf.
 
ProLogis owns and manages interests in over 2,500 distribution facilities, service offices and properties spanning 475 million square feet of space (including properties under development), of which approximately 2.2 million square feet are located in Canada.
 
The company leases its industrial facilities to over 4,400 customers, which mostly include manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises with large-scale distribution needs.
 
Although the overall global economy is gradually improving, industrial real estate leasing conditions remained mixed with a revival in leasing activities in the U.K. and Europe, but were soft in the U.S. The continued troubles in the residential sector are also weighing on commercial property operations.
 
The credit crunch has widened the bid-ask spread between buyers and sellers of commercial real estate, which has caused deal volumes to fall dramatically. In addition, rise in market vacancies will impact ProLogis’ ability to push through rental rate increases. Consequently, we maintain our Neutral rating on ProLogis with a Zacks #3 Rank, which indicates a short-term ‘Hold’ recommendation.
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