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In a bid to expand its European platform, Prologis Inc. (PLD - Analyst Report) penned a Build-to-Suit deal with Hi Logistics, a specialist logistics subsidiary of LG Electronics. In addition, the company would develop two speculative facilities. In total, the three buildings will span over 700,000 square feet.

Particularly, the Build-to-Suit deal with Hi Logistics will span 165,000-square-foot and will be positioned at the key distribution hub, Prologis Park Ryton in the West Midlands. It will be the regional distribution center for the customers of Hi Logistics. The company will also develop a 225,000-square-foot speculative facility at the park.

The other facility will be located at Prologis Park Dunstable and span 310,000-square-foot. This facility is in close proximity to the primary north-south transit corridor of the country and is well connected to the London Luton Airport.

With a larger customer base and supply chain consolidation, the demand for well-positioned, Class-A logistics facilities remains high. Moreover, the pace of new units’ construction is low. It is this demand-supply disparity that is set to define the market dynamics in the near term. With a capacity to offer modern distribution facilities in strategic infill locations, Prologis is set to gain from this.

With about 17 million square feet of logistics and distribution space as of Jun 30, 2013, Prologis has a solid foothold in the UK industrial real estate market. Its portfolio is more than 97% leased that reflects the strong demand for its facilities. Also, the deal depicts Prologis’ effort to strengthen its ties with existing customers such as Hi Logistics that already occupies Prologis facilities in The Netherlands and Poland.

Prologis currently carries a Zacks Rank #3 (Hold). Some better performing REITs include CubeSmart (CUBE - Snapshot Report), Highwoods Properties Inc. (HIW - Analyst Report) and SL Green Realty Corp. (SLG - Snapshot Report), all carrying a Zacks Rank #2 (Buy).

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