Equivalent Of 2.5% Of World GDP Moves Through Prologis Facilities — Report

The total value of goods passing through a Prologis Inc. PLD facility is estimated at $2.2 trillion annually, up 69% from the company's 2017 throughput. That equates to 2.5% of world GDP and 4.4% of global household consumption.

In the U.S., $1.4 trillion of throughput, or 6.3% of GDP, resides in a Prologis warehouse at some point during the year.

These were a couple of highlights in a report performed by advisory firm Oxford Economics on the economic impact of the world's leading logistics real estate investment trust (REIT). San Francisco-based Prologis commissioned the firm to refresh the company's study, "Future Flow of Goods," which was first compiled in 2017.

"This study shows just how critical logistics real estate is to the vitality of the global economy," stated Prologis Chairman and CEO Hamid Moghadam.

The growth in warehouse throughput is in part due to an increase in customers ordering goods online, with fulfillment being accomplished without the product ever reaching a retail store. In its second-quarter earnings report, Prologis said 24% of new leases signed were related to e-commerce. That grew to 40% during the peak of COVID-19 shutdowns.

E-commerce in the U.S. has grown in the mid-teen percentage range over the past two years, up 14.8% year-over-year in the first quarter of 2020, according to the Census Bureau. The increase in e-commerce fulfillment is driving the need for logistics real estate higher.

Prologis recently indicated the supply chain disruption caused by COVID-19 could result in many companies carrying 5%-10% more inventory in the future to avoid the supply shocks that have marked the pandemic.

However, Prologis' 69% two-year growth rate isn't indicative of the increase other logistics REITs are seeing. The company has seen outsize growth compared to the industry due to a couple of large portfolio acquisitions. Earlier this year, Prologis closed on a $13 billion transaction for Liberty Property Trust and a $4 billion deal for Industrial Property Trust. The company has also inked several expansion projects and other ventures, which drove consolidated revenue 60% higher year-over-year in the second quarter.

By comparison, the Prologis portfolio included 684 million square feet in 2017 and represented 2.4% of GDP in the 19 countries where it operates. In 2019, the company's portfolio grew to nearly 1 billion square feet, touching 3.5% of GDP in those countries.

The report also showed the jobs impact Prologis has. More than 850,000 people go to work each day in a Prologis facility, up 57% since 2017. The report estimated that activities at a Prologis facility directly and indirectly support 2.8 million jobs globally, including 1.3 million in the U.S and 334,000 in China.

The report concluded that Prologis' total global economic impact from operations in its facilities accounts for $226 billion annually.

"Every day, Prologis sees many of the goods that make modern life possible flow through our distribution centers, which in turn underscores the interconnected nature of global trade," said Moghadam.