As retailers are competing on package-delivery time, Industrial REIT Prologis Inc. (PLD - Free Report) surely knows how to capitalize on the growing demand for logistic facilities rising from such trend.
The company, which developed a vertical warehouse in Seattle’s Georgetown neighborhood, a concept which is not common in the United States, has been able to secure Amazon (AMZN - Free Report) and Home Depot (HD - Free Report) as its tenants, according to the Wall Street Journal. This facility, which enjoys proximity to downtown Seattle, will have Amazon taking up almost 500,000 square feet of space and Home Depot occupying nearly 100,000 square feet.
Speeding up delivery times has been a prime ground of competition for retailers, including Amazon and Home Depot in wooing customers/shoppers. However, in doing so, having distribution facilities close to customers in urban dense areas is more important than having warehouses in distant suburban sites.
Nonetheless, getting adequate land for sprawling warehouses in the middle of a city to be close to customers is a huge challenge, and also comes with a premium, making vertical warehouses a viable option. Although warehouses, where trucks’ accessibility to multiple levels via ramps have become popular in densely-populated cities in Asia and Europe, are yet to gain attention in the United States.
The race for delivery, nonetheless, has already begun, and companies like Amazon, Walmart Inc. (WMT - Free Report) and several others biggies in the retail industry have been making a massive push for lowering delivery time. Therefore, demand for such vertical facilities are likely to increase in the near future as these facilities allow for more storage of goods near their end destination.
In this favorable environment, Prologis is well poised to benefit from its capacity to offer modern distribution facilities at strategic in-fill locations. The company is actively banking on its growth opportunities.
Prologis also has decent balance-sheet strength to back its growth endeavors. Being a market leader, the company has the ability to raise capital at favorable rates. Nevertheless, rising supply and protectionist trade policies are key concerns.
Prologis currently carries a Zacks Rank #3 (Hold). In the year-to-date period, shares of the company have outperformed the industry. While the stock has surged 40.4%, the industry has gained 23% during this period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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