Industrial real estate investment trust (REIT), Prologis Inc. (PLD) launched a joint venture (JV) in China to expand its business and leverage on the growing needs of Class-A distribution space. The deal is in partnership with HIP China Logistics Investments Limited, for building, acquiring and managing logistics properties in its global markets in China.
The JV – Prologis China Logistics Venture 2 – has a capacity of more than $1 billion, including $588 million of committed equity, for investments in the nation. This follows another JV that was earlier formed in Mar 2011 by Prologis and was named – Prologis China Logistics Venture 1.
Prologis’ investment in the logistics market in China comes at an opportune time. On one side, there is solid growth in consumption in the market while on the other side, the supply of Class-A distribution space remains limited. It is the supply and demand disequilibrium that is driving the demand for logistics properties.
In fact, as per the third-quarter 2013 China Real Estate Market Review and Outlook published by CBRE Group, Inc. (CBG), the logistics market remained solid and upbeat and demand for quality facilities is expected to be steady, going forward.
As per that study, in China, solid demand kept market average vacancies of major markets at very low levels in third-quarter 2013 while limited supply led to elevated rent rates.
In fact, this continued solid performance and optimistic outlook of the logistics market in China, is grabbing the attention of both domestic and international investors. Notably, in Aug 2013, The Carlyle Group (CG) and The Townsend Group disclosed investments worth $200 million for the partial stake acquisition in certain properties owned by Shanghai Yupei Group as well as construction of new warehouses over the next two years.
As such we believe that Prologis stands to benefit as it has the capacity to offer modern distribution facilities in strategic infill locations globally. We remain optimistic and expect this move to help the company ride on the growth trajectory, going forward.
Prologis currently carries a Zacks Rank #3 (Hold). However, one can consider another REIT that is performing better and looks promising – Cousins Properties Inc. (CUZ) – with a Zacks Rank #2 (Buy).
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