Plans ‘Coming Off Shelf’: ProLogis

The industrial real estate market is slowly beginning to heat up as supply chain plans “come off the shelf,” says the head of one of the world’s largest industrial developers.

“While one quarter does not signal a trend, we are feeling cautiously optimistic,” ProLogis CEO Walter C. Rakowich said today.

"Looking ahead, we see a global market that's beginning to show signs of stability," he said in a conference call with investment analysts. "Perhaps growth and expansion will come sooner than we thought. We'll see."

The company, which underwent a major reorganization and sale of several subsidiaries in the past year, lost $11.7 million on $273.9 million in revenue in the quarter, while reporting $168.6 million in rental income.

But the Denver-based developer of distribution facilities saw an improvement over the second quarter and signs of better times ahead. Occupancies at its sites increased for the first time in two years in the third quarter, one of several signs that “industrial property market fundamentals are firming up,” Rakowich said. Leasing was up 13 percent overall from the second quarter, as ProLogis strives to convert more of its properties to leasing.

“While there continues to be pressure on market rental rates, overall market occupancies seem to be stabilizing, with an increase in customer activity,” he said.

Two-thirds of the customers recently surveyed by ProLogis said they expect "a more positive outlook on their business" by sometime next year. "Several of them mentioned supply chain reconfigurations, which sometimes means expansion and sometimes is simply a search for greater efficiencies," Rakowich said.

"Either way, it's good for us, because there is likely to be movement into higher quality, well-located and in many cases newly built facilities, and that's our business."

Contact William B. Cassidy at wcassidy@joc.com.