Prologis Inks Build-to-Suit Deals in Europe - Analyst Blog

Ushering in good news for its European platform, industrial real estate investment trust (REIT) Prologis Inc. PLD penned two build-to-suit deals in the continent for a total space of 244,000 square feet. The deals mark the increasing demand for Prologis facilities in this part of the world.

The first deal is for a 123,000 square feet facility at The Bridge in Dartford, UK, penned with a high-tech manufacturing group SEM. Notably, The Bridge is a joint venture development between Prologis and the Dartford Borough Council and comprises 264-acre of land.

The second deal is for a 121,000 square foot logistics facility at Prologis Park Szczecin in northwest Poland. It is signed with a Danish third-party logistics company – Prime Cargo. Positioned at the heart of the motorway network, this facility would operate as a distribution center for the Scandinavian customers of Prime Cargo.

As a matter of fact, the demand-supply disequilibrium is defining the market dynamics in the near term in Europe. On one hand, there is a solid demand for well-positioned, Class-A logistics facilities and expansion of the current ones remain high amid a larger customer base and supply chain consolidation. But on the other hand, with the low pace of new units' construction, there is a dearth of supply of high-quality logistics facilities in the market.

Hence, with a well-positioned land bank and a solid expertise in development activities, Prologis is set to capitalize on this and expand in major European markets. In fact, with around 149 million square feet of logistics and distribution space as of Dec 31, 2013, Prologis is the leading provider of industrial real estate in Europe.

Going forward, we believe that efficiencies from enhanced scale, development initiatives and recovering rents set the ground for growth for this REIT. The company came up with better-than-expected results in fourth-quarter 2013. In February, the company also announced an 18% increase in its quarterly dividend rate.

Prologis currently carries a Zacks Rank #3 (Hold). Investors interested in the REIT industry may also consider stocks like Cousins Properties Inc. CUZ, Health Care REIT, Inc. HCN and Public Storage PSA. All these stocks currently have a Zacks Rank #2 (Buy).