In the centre of the action: Prologis CEO Hamid Moghadam. Ten million people live within 50 miles of Prologis’s new distribution centre on the old Oakland Army Base
Image: Timothy Archibald for Forbes
Peer out the 56 garage doors lining the walls of the warehouse giant Prologis’s new 260,000-square-foot facility in Oakland, California, and you’ll spot three highways. To the east there’s I-980 slicing through downtown Oakland; southbound I-880 leads to Silicon Valley; go north on I-580 and you’ll end up in the heart of Marin County. San Francisco is just 9 miles to the west. A railroad train could steam right up to the building and carry goods all the way to Chicago. But it’s those local roads that most interest Hamid Moghadam, Prologis’s CEO. “We are focussed on the markets where there are large numbers of people and there’s lots of money in their pockets,” Moghadam says. “You rob a bank, because that’s where the money is. Where do you have consumption? Where people are.”
With 687 million square feet of warehouse space in 19 countries, Prologis, which is based in San Francisco, is the world’s largest owner of industrial real estate and the king of the proverbial “last mile” between the warehouse and a customer’s doorstep. Its closest competitor, Indianapolis-based Duke Realty, has 20 percent of its space. In the US, 60 percent of the population lives within 100 miles of Prologis’s 379 million domestic square feet. And it’s not ignoring the rest of the world. Seventy percent of Prologis’s 45-million-square-foot development pipeline is outside the country, in places were ecommerce is growing at a faster clip.
Because if you believe in ecommerce, you believe in Prologis. While internet shopping has devastated demand for traditional retail spaces, it has had the opposite effect on industrial real estate. Amazon is Prologis’s largest tenant, occupying 16 million square feet. (Prologis is also Amazon’s largest landlord, accounting for 13 percent of the warehouse space it operates.) Why? Getting a book to you in less than 48 hours (Amazon Prime’s promise) means already having it—and several thousand other items—nearby when you order.
Ecommerce accounts for about 9 percent of total retail sales in the US, a share that has more than doubled since 2010. Prologis, which is structured as a real estate investment trust, is benefiting hugely from that growth. The company’s shares are up by 22 percent this year (through October), producing a market capitalisation of $34.8 billion. (Reits broadly are down by 1.5 percent. Prologis’s direct competitors DCT Industrial and Duke are up by 21 percent and 7 percent, respectively.) In 2016, Prologis’s net income was $1.2 billion, on revenues of $2.5 billion. Earnings have grown at an average of 58 percent annually for three years. In the last quarter, rents on new or renegotiated leases were up by 23 percent year-over-year and occupancy was at 96 percent.
Prologis is the king of the proverbial “last mile” between the warehouse and a customer’s doorstep
(This story appears in the 22 December, 2017 issue of Forbes India. To visit our Archives, click here.)