Copyright 2007, Traffic World, Inc.
All the speculation and concern over the U.S. freight recession hasn''t reached real estate developer ProLogis.
In July alone, the Denver-based commercial real estate developer announced formation of a $1.8 billion property fund to acquire assets in Las Vegas and Reno, Nev., Eastern Pennsylvania, Southern California and Chicago - that last staking the companies'' claim to a piece of the burgeoning Union Pacific intermodal facility that promises to be a new gateway for freight from Asia entering Midwestern markets through new seaports in western Canada.
Additionally in July, the company leased more than 600,000 square feet in Baltimore to a national home improvements retailer. Michael Nachamkin, ProLogis senior vice president and regional head of capital deployment, said, "The transaction highlights the attractiveness of this property as a logistics site for customers with large-scale distribution needs on the East Coast."
Not bad in an economy that registered an anemic 0.7 percent growth in the second quarter of 2007.
But ProLogis''s global portfolio - focused on the largest shippers looking for hundreds of thousands of square feet in the biggest markets - keeps the company well insulated from yo-yo swings in the U.S. consumer economy, which has become increasingly competitive with expanding home markets in Europe and Asia. Also in July, ProLogis announced leases of more than 200,000 square feet each with Sony in Japan, and with logistics providers in western Germany and Juarez, Mexico.
Richard Armstrong, CEO at Armstrong & Associates, said so far ProLogis hasn''t put a foot wrong in the global distribution facilities markets. "They really are masters at playing that game of acquiring funds and then building buildings in the right places." ProLogis is far and away the world''s largest owner and manager of warehouse distribution space, now approaching a half-billion square feet worldwide. Armstrong said that rather than suppressing competition and inflating real estate prices, "I think their dominance fosters competition. In the hot markets they are adding capacity that is needed. They are really providing modern warehousing capacity in places that really need more modern warehousing capacity."
If there''s any fly in the ointment, Armstrong said, it could be that between frantic construction and a slowing economy, some crowded markets such as the L.A. Basin could be reaching a saturation point.
Also, Armstrong said, international trade flows are coming under protectionist pressure from a backlash against globalization. Concerns about China''s currency relative to the U.S. dollar, along with the former''s current account surplus and the latter''s yawning trade deficit, have prompted some in Congress to propose controls of Chinese exports to the United States.
While there''s little reason to believe the Bush administration would support such controls, a Democratic Congress and a possible Democratic president after 2008 could be more sympathetic to measures that might indirectly affect shipper enthusiasm for ProLogis''s mega-distribution centers. For now, though, there''s no slackening of interest in the company''s stock of wide-open spaces.