With increasing demand for modern distribution facilities, Prologis Inc. (PLD), a leading industrial real estate investment trust (REIT), has recently signed a build-to-suit agreement to construct a new e-commerce distribution hub spanning 473,000 square feet in Osaka, Japan. The deal was penned with MonotaRO Co., Ltd. – one of the premier online industrial tool retailers in Japan.
Prologis will start construction on the proposed hub in November 2012 and expect to wind it up by September 2013. The distribution hub will come up in Prologis Park Amagasaki 3, which is strategically located in close proximity to the central business district of Osaka with easy access to major expressways and a commuter rail station.
Prologis acquires, develops, operates and manages industrial real estate space in North America, Asia and Europe. As of March 31, 2012, Prologis had approximately 22 million square feet of logistics and distribution space in Japan. Given its international presence, Prologis has lately faced unfavorable foreign currency movements and other economic fluctuations that have impaired its top-line growth.
Furthermore, although first quarter 2012 results were in sync with the Zacks Consensus Estimates, macroeconomic issues had contributed to a slower pace of recovery as the industry was affected by the continued concerns about sovereign debt issues, rising energy costs, global military actions and the devastation and loss caused by the earthquake and tsunami in Japan.
In addition, the unrelenting troubles in the residential sector are weighing on commercial property operations. The credit crunch has also widened the bid-ask spread between buyers and sellers of commercial real estate, which has caused deal volumes to fall compared to pre-recession levels. Moreover, market vacancy increases is expected to mitigate Prologis’ ability to push through rental rate increases, thereby affecting the long-term growth of the company.
We currently have a Neutral recommendation and a Zacks #3 Rank for Prologis, which translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #2 Rank (short-term Buy rating) for Winthrop Realty Trust (FUR), one of the peers of Prologis.
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