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Here's Why You Should Hold Prologis (PLD) Stock in Your Kitty
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Prologis Inc. (PLD - Free Report) is well-positioned to bank on the favorable industrial real estate market environment, backed by its solid operating platform and robust scale. The company, which has emerged as a market leader in this asset category, is witnessing the solid demand for its industrial real estate, as reflected by the leasing, rent and occupancy levels of the properties.
Undoubtedly, with the e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, demand for logistics infrastructure and efficient distribution networks has risen. This is aiding the industrial real estate market to prosper and benefit Prologis, STAG Industrial, Inc. (STAG - Free Report) and First Industrial Realty Trust, Inc. (FR - Free Report) .
Resilience is essential to the future supply chain. Therefore, over the long term, apart from the fast adoption of e-commerce, logistics real estate is expected to benefit from a likely increase in inventory levels, offering possibilities to industrial landlords, including Prologis, STAG Industrial and First Industrial Realty, to enjoy a favorable market environment.
Prologis, in particular, has been witnessing a decent operating performance. The average occupancy level in Prologis’ owned and managed portfolio was 98% in the fourth quarter.
Further, 42.5 million square feet (msf) of leases commenced in the company’s owned and managed portfolio, with 36.9 msf in the operating portfolio and 5.6 msf in the development portfolio in the fourth quarter. The retention level was 82.4% in the quarter, up from 76.4% in the prior quarter.
Prologis’ share of net effective rent change came in at 50.6% in the October-December quarter, which was led by the United States at 55%. The cash rent change was 32.4%.
Cash same-store net operating income (NOI) grew 9.1% in the fourth quarter, which was led by the United States at 9.6%. For 2023, management expects cash same-store NOI (Prologis share) in the range of 8.5-9.5%.
With healthy operating fundamentals in industrial real estate markets, Prologis has capitalized on growth opportunities through acquisitions and developments. In October 2022, PLD closed the acquisition of Duke Realty in an all-stock transaction valued at $23 billion, including the assumption of debt, boosting its presence in the key markets of the United States.
Moreover, in 2022, the company’s share of acquisitions amounted to $2.07 billion, with a weighted average stabilized cap rate (excluding other real estate) of 4.3%. For 2023, the company anticipates acquisitions at Prologis share between $300 million and $600 million, while development starts are expected in the range of $2.5-$3 billion.
Prologis is focused on bolstering its liquidity. This industrial REIT’s liquidity amounted to $4.1 billion in cash and availability on its credit facilities as of Dec 31, 2022. Given its balance sheet strength and prudent financial management, PLD is well-poised to capitalize on growth opportunities.
Moreover, solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Prologis remains committed to that. In the last five years, Prologis has increased its dividend five times, and its five-year annualized dividend growth rate is 11.91%. Check Prologis’ dividend history here.
However, with the asset category being attractive in these challenging times, there is a development boom in many markets. This high supply is likely to fuel competition and curb pricing power. New supply is likely to affect pressure on the vacancy level and rent growth to some extent in the upcoming quarters.
Also, the stabilization of e-commerce sales growth raises concerns for Prologis. Moreover, a hike in the interest rate is a concern for PLD. Rising rates imply higher borrowing costs for the company, affecting its ability to purchase or develop real estate. Further, the dividend payout might become less attractive than the yields on fixed income and money market accounts.
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Here's Why You Should Hold Prologis (PLD) Stock in Your Kitty
Prologis Inc. (PLD - Free Report) is well-positioned to bank on the favorable industrial real estate market environment, backed by its solid operating platform and robust scale. The company, which has emerged as a market leader in this asset category, is witnessing the solid demand for its industrial real estate, as reflected by the leasing, rent and occupancy levels of the properties.
Undoubtedly, with the e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, demand for logistics infrastructure and efficient distribution networks has risen. This is aiding the industrial real estate market to prosper and benefit Prologis, STAG Industrial, Inc. (STAG - Free Report) and First Industrial Realty Trust, Inc. (FR - Free Report) .
Resilience is essential to the future supply chain. Therefore, over the long term, apart from the fast adoption of e-commerce, logistics real estate is expected to benefit from a likely increase in inventory levels, offering possibilities to industrial landlords, including Prologis, STAG Industrial and First Industrial Realty, to enjoy a favorable market environment.
Prologis, in particular, has been witnessing a decent operating performance. The average occupancy level in Prologis’ owned and managed portfolio was 98% in the fourth quarter.
Further, 42.5 million square feet (msf) of leases commenced in the company’s owned and managed portfolio, with 36.9 msf in the operating portfolio and 5.6 msf in the development portfolio in the fourth quarter. The retention level was 82.4% in the quarter, up from 76.4% in the prior quarter.
Prologis’ share of net effective rent change came in at 50.6% in the October-December quarter, which was led by the United States at 55%. The cash rent change was 32.4%.
Cash same-store net operating income (NOI) grew 9.1% in the fourth quarter, which was led by the United States at 9.6%. For 2023, management expects cash same-store NOI (Prologis share) in the range of 8.5-9.5%.
With healthy operating fundamentals in industrial real estate markets, Prologis has capitalized on growth opportunities through acquisitions and developments. In October 2022, PLD closed the acquisition of Duke Realty in an all-stock transaction valued at $23 billion, including the assumption of debt, boosting its presence in the key markets of the United States.
Moreover, in 2022, the company’s share of acquisitions amounted to $2.07 billion, with a weighted average stabilized cap rate (excluding other real estate) of 4.3%. For 2023, the company anticipates acquisitions at Prologis share between $300 million and $600 million, while development starts are expected in the range of $2.5-$3 billion.
Prologis is focused on bolstering its liquidity. This industrial REIT’s liquidity amounted to $4.1 billion in cash and availability on its credit facilities as of Dec 31, 2022. Given its balance sheet strength and prudent financial management, PLD is well-poised to capitalize on growth opportunities.
Moreover, solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Prologis remains committed to that. In the last five years, Prologis has increased its dividend five times, and its five-year annualized dividend growth rate is 11.91%. Check Prologis’ dividend history here.
However, with the asset category being attractive in these challenging times, there is a development boom in many markets. This high supply is likely to fuel competition and curb pricing power. New supply is likely to affect pressure on the vacancy level and rent growth to some extent in the upcoming quarters.
Also, the stabilization of e-commerce sales growth raises concerns for Prologis. Moreover, a hike in the interest rate is a concern for PLD. Rising rates imply higher borrowing costs for the company, affecting its ability to purchase or develop real estate. Further, the dividend payout might become less attractive than the yields on fixed income and money market accounts.