Groundbreakers Presentation, Research & Lease Comps

Executive Summary

Prologis had its annual Groundbreakers presentation along with a new piece of intriguing research on where this automation train is headed. After a quick review of the latest lease comps of the last 30 days, I’ll give both high-level takeaways. 

Lease Comps

While every investor call and market report will tell you that lease rates are going up 5-10% this year, the trialing 30-day lease comps tell me that rates are softening. Let us put together a leasing strategy for your next lease expiration. Download Lease Comps.

Furthermore, we analyzed the Orange County industrial lease comps using CompStak for the 20,000 – 200,000 SF size range to help zero in on this trend. We found that lease rates peaked around December 2022 and have steadily declined. Don’t let the graph fool you; the decline is only $0.04 PSF, but with an increase in free rent, effective rates are going down slightly more than that. The nuance in this discussion is that these are all existing Class A or Class B industrial properties. New construction Class A properties are $2.00-$2.50 PSF NNN throughout the four counties. The question for you is, do you need new construction? Download Trailing 12-Month Graph. 

Groundbreakers Presentation

The first session included Hamid Moghaddam, who is always dynamic, and he did not disappoint. This was one of my favorite interviews. Below are the topics and briefs to help identify the one you want to explore.

• The Future Is Here: Is Your Supply Chain Ready?
  • AI integrates into every touch point of our lives—from how we work and commute to how we interface with commerce. It’s an essential part of logistics, and the adoption of AI is just beginning. Join two leading visionaries at the forefront of supply chain infrastructure as they share their insights into the future of commerce and sustainable logistics.
• Where Has the Workforce Gone?
  • The world’s workforce is empowered and has new expectations employers struggle to meet. The demand for innovation and solutions to develop and upskill talent for sustainable career paths has never been greater.
• The Power Shift in Mobility: How Will You Plug in?
  • The proliferation of electric vehicle infrastructure is advancing the race to carbon zero and delivering the cost-efficiencies and control needed to create a more resilient supply chain. Innovators are thinking big about electrifying everything, accelerating history’s most complex and exciting energy transition.
• Energy Transition and Renewable Energy: Is the World Prepared?
  • Greenhouse gas emissions must be cut in half to maintain a sustainable planet, yet energy consumption is expected to double by 2050. Groundbreaking companies and experts in the energy sector are leading the essential transformation to cleaner, more efficient energy solutions and sources.
• Logistics That Learn: Transformation Through Intelligence
  • Remarkable surges in AI capabilities have led to many innovations, including autonomous vehicles, chatbots, and intelligent IoT devices. These and other AI-enabled systems are revolutionizing and benefiting all aspects of our society and economy—everything from commerce and healthcare to transportation and cybersecurity. But with these advances come risks, the question of authenticity, and the fear of singularity.
• The Supply Chain Is Still the Supply Chain Until AI Steps In
  • How do some of the most diverse and instrumental supply chain companies navigate the possibilities and implications of AI while advancing safety and efficiencies in today’s supply chain? Join the supply chain’s frontier thinkers in a rapid-fire conversation about what’s next as AI evolves.

Here is the link to the on-demand presentation: https://www.prologis.com/groundbreakers. 


Prologis Research Report

The quote that most resonate with my experience in the marketplace is, “With logistics real estate at 5% of total supply chain cost—transportation averages 50% and labor averages 35%—retailing strategy, transportation plan, and labor/automation design dictate real estate decisions.” Now balance that with the fact that real estate has increased 1.5 – 3X, and that principle still stands.

• Despite automation and data analytics advancements, logistics real estate investments outpaced revenue growth by 57% during the past decade. We call this the “supply chain productivity paradox.”
• This paradox emerged because larger, decentralized logistics real estate networks unlock revenues and save on costs in previously impossible or well-understood ways. We identify the top five drivers.
• AI and data capabilities’ primary purpose is to increase supply chain adaptability to drive revenues; efficiency investments are secondary and unlikely to reduce real estate requirements.
• Logistics operations are incorporating new automated technologies at an increasing rate. Use of Autonomous Mobile Robots (AMRs) is growing the fastest, with limited implications for real estate. We expect that up to half of all logistics operations could incorporate AMRs over the next 10-15 years.
• Automation can increase throughput and is a catalyst to upgrade facilities. Access to power infrastructure, especially renewable energy, is increasingly a top consideration in logistics real estate decisions.

You can download the report here: https://www.prologis.com/news-research/global-insights/future-proofing-global-supply-chain-how-ai-automation-and-other.

Media

• Book #1
  • Industrial Intelligence, The Executive’s Guide for Making Informed Commercial Real Estate Decisions
    • Audible / Audiobook Now Available!
    • Buy Paperback & Kindle
• Book #2
  • Industrial Income, The Investors’ Guide to Maximize the Value in Commercial Real Estate Leases
    • The book is done and laid out on the page with the editor. The official release date and pre-order are coming out soon. I should be in the recording studio for the audiobook in the next two weeks. The book cover is below.

• Podcast

  • Subscribe to the show or listen to individual episodes here.

We’d love to catch up with you and brainstorm how we can make your goals come to life.


Best Regards,

Justin Smith, SIOR              Grant LaBounty                     
jbsmith@leeirvine.com         glabounty@leeirvine.com        

Chris Vassilian                     Jeannette Cano
cvassilian@leeirvine.com     jcano@leeirvine.com