Daily Brief: A Billion Square Feet Of Warehouse Space Wasn’t Enough For Prologis

Daily Brief: A Billion Square Feet Of Warehouse Space Wasn’t Enough For Prologis

over 1 year ago3 mins

Mentioned in story

Warehousing giant Prologis announced on Monday that it’s buying smaller rival Duke Realty.

What does this mean?

Prologis already controls about a billion square feet of warehouses and distribution centers for the likes of Amazon, Home Depot, and FedEx. But hungry for more, Prologis has been courting Duke Realty for a while now: the giant first approached its smaller rival back in November, and recently made an “insufficient” offer worth $24 billion last month. And its determination has paid off: the two companies just shook hands on an all-stock deal worth $26 billion, with Duke’s shareholders receiving almost half of a Prologis share for each of their existing ones.

The deal – Prologis’s first in two years – will see the world’s biggest warehouse owner claim industrial real estate in some popular locations, from sunny Southern California to the vast land in Dallas, Texas. Prologis believes that could help it make up to $400 million in extra earnings every year. No wonder it was so persistent…

Prologis stock
Source: Google Finance

Why should I care?

The bigger picture: Buy, don’t build.

There’s a reason Prologis was so keen to sign the deal: the ongoing online shopping boom has sent demand for warehouses through the roof, leaving only 3.4% of US warehouses vacant in the first three months of this year. And while developers have rushed to start building more, rents are already soaring for existing locations. But Prologis is ahead of the curve: it can profit more from those higher rents much faster with this deal than it could if it built them from scratch.

Zooming out: Rent’s cheap.

Warehousing might be going strong, but other areas of the real estate market are cooling down. In fact, one of the biggest real estate investors in the world says the US and European markets are seeing a downward shift in prices as higher interest rates dampen demand: it said it’s even seen prices fall around 5 to 10% from last year in some areas.

Housing market cools

Keep reading for our next story...

The UK Economy Shrank Again In April

BoE image

Data out on Monday showed that the UK economy shrunk unexpectedly in April.

What does this mean?

Economists weren’t expecting much from the UK in April, especially since rising taxes and energy prices meant the country had the highest inflation of any G7 country. But things were even worse than predicted: the services sector – which makes up the bulk of the UK’s economy – shrunk 0.3%, as folk spent less on healthcare and Covid test and trace activity fell off a cliff. The production and construction sectors dropped by 0.6% and 0.4% too, partly because businesses were hindered by supply shortages and higher prices. That’s the first time all those sectors have simultaneously dipped since January 2021, and that pushed the UK economy to shrink 0.3% in April from the month before – way off the 0.1% growth economists expected.

UK GDP

Why should I care?

The bigger picture: Careful, there.

The UK economy hasn’t grown for three-straight months, suggesting the country’s recovery has well and truly stalled. In fact, economists now predict the economy will shrink 0.4% this quarter, well below the Bank of England’s (BoE’s) 0.1% growth forecast. And with energy prices set to push inflation even higher later this year, economists think the central bank will be forced to keep hiking rates. Still, since the economy’s looking so weak, it’s widely expected the BoE will stay away from big hikes and stick to 0.25% when it makes its announcement later this week.

UK inflation

Zooming out: Up, up, and away.

Rising commodity prices have been pushing up prices of goods around the world, so much so that new research from Citi predicts consumers will pay producers $5.2 trillion more this year than they did before the pandemic. And the longer supply issues continue, the worse it could get: Citi warned of more countries hoarding supplies instead of exporting them, which would put even more pressure on prices.

Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG