ProLogis (PLD), a leading global provider of distribution facilities, has recently signed three new lease agreements spanning about 449,000 square feet of its development portfolio in Europe. The continued leasing activities in the region show signs of stabilization in the industrial property market after a prolonged recession that pushed back the sector.
About 273,000 square feet of space were leased to an unnamed global logistics and freight services company. The lessee will occupy the space at ProLogis Park Venlo Building Three in Venlo, The Netherlands. The company also leased 116,000 square feet of space at ProLogis Park Chorzow Building Eight in Poland, to ArchiDoc, a leader in document management outsourcing solutions. At the same time, ProLogis leased 60,000 square feet at ProLogis Park Chorzow Building Nine to Hellmann Worldwide Logistics Polska, a third-party logistics provider in Poland.
ProLogis had earlier acknowledged in its research that improving economic conditions have fueled a recovery in industrial real estate in Europe, and the stage is set for a continuing recovery with limited new supply in the pipeline. Furthermore, leasing decisions that were earlier postponed due to volatility in the markets are gradually coming off the shelf.
We maintain our Neutral recommendation on ProLogis, which currently has a Zacks #3 Rank which translates into a short-term Hold rating, indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.
The credit crunch has widened the bid-ask spread between buyers and sellers of commercial real estate. In addition, market vacancy increases will mitigate ProLogis’ ability to push through rental rate increases, adversely affecting its top-line growth.
Meanwhile, our long-term Neutral recommendation on the stock is based on the belief that ProLogis has considerably reduced operating risks through continued lease-up of its development portfolio. ProLogis also has a geographically diverse portfolio of distribution facilities that integrate international scope and expertise with a strong local presence in its markets, which provides a strong upside potential for the company.
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