Prologis Inks Build-to-Suit Deal in Mexico - Analyst Blog

Mexico is on the cards for industrial real estate investment trust, Prologis, Inc. PLD. After disclosing its sole sponsorship of FIBRA Prologis last week, the company has now announced a build-to-suit deal for a 500,000 square foot distribution center in Monterrey, Mexico.

The deals mirror the company's strategic efforts to leverage on the growing demand for premium logistic facilities in this region driven by consumption. The present build-to-suit deal is signed with a repeat customer, Uline – the distributor of shipping, industrial and packaging materials with presence throughout North America.

Specifically, the facility would come up at the city's premier master-planned park, Prologis Park Apodaca, which enjoys proximity to the Monterrey International Airport. This park would include 6 buildings spanning 1.4 million square feet of space as well land that can support another 2 million square feet of space.

As a matter of fact, there is an increasing demand for Class-A facilities in Mexico with rise in consumption, e-Commerce application and supply chain consolidation. Amid this environment, same day shipping has grabbed significant attention. Uline also aims at meeting customers' demand for same-day shipping as the facility would help it to enhance its amount of inventory stocked in Monterrey.

With improving operating conditions, the Latin American market remains a good investment option for Prologis. According to the International Monetary Fund, GDP growth in Mexico is projected to be 3.0% in 2014, up from only 1.1% in the prior year.

The market continues to experience a recovery in demand while occupancy rate across the six largest logistics markets continued to improve. With around 31.7 million square feet of logistics and distribution space in Mexico as of Mar 31, 2014, Prologis seems to be well capitalizing on this market's growth potential.

Prologis currently carries a Zacks Rank #3 (Hold). Investors interested in the REIT industry may also consider stocks like The GEO Group, Inc. GEO, Terreno Realty Corp. TRNO and W. P. Carey Inc. WPC. All these stocks sport a Zacks Rank #1 (Strong Buy).