Here’s why you should stick with Prologis stock (PLD) now
The industrial asset class has gained attention for demonstrating resilience in the face of the coronavirus pandemic with low vacancy rates, high asking rents and strong rent collections. In fact, amid the boom in electronic commerce, the growth of industries and businesses striving to improve supply chain efficiency, the demand for efficient logistics infrastructure and distribution networks is growing. is accelerated. It helps the industrial real estate market to thrive.
In addition to the rapid adoption of e-commerce, logistics real estate is expected to benefit from increased inventory levels after the global health crisis, providing opportunities for industrial owners, especially Prologis Inc. PLD, Duke Realty Corp. DRE, Terreno real estate company TRNO and Rexford Industrial Realty, Inc. REXR, to take advantage of a favorable market environment.
In particular, Prologis is well positioned to capitalize on a favorable environment supported by its solid operational platform and its robust size. The company, which has established itself as a market leader in this asset class, is experiencing strong demand for its industrial real estate, as evidenced by the rental, rent and occupancy levels of buildings.
Prologis has witnessed decent operational performance amid the pandemic. The average occupancy rate of the owned and managed portfolio of Prologis was 95.4% in the first quarter and is in line with seasonality. In addition, during the quarter, 43.9 million square feet of leases began in the portfolio owned and managed by the Company, with 39 million square feet in the operating portfolio and 4.8 million square feet in the development portfolio. In addition, Prologis’ share of the net change in effective rents was 27% in the January-March quarter, led by the United States to 32%. The change in cash rents was 12.5%. In addition, rental collections remain strong and the company did not actually have any bad debt during the quarter.
With healthy operational fundamentals in the industrial real estate markets, Prologis has capitalized on growth opportunities through acquisitions and developments. The company’s share of real estate acquisitions was $ 71 million, with a weighted average stabilized capitalization rate of 5% in the first quarter. Development stabilization totaled $ 396 million, while housing starts totaled $ 575 million, of which 60.6% are custom-built. Its high number of tailor-made development projects highlights the advantageous situation of the company’s land reserve.
For 2021, the company is forecasting building acquisitions of $ 600 million to $ 800 million from Prologis compared to the previously mentioned $ 400 million to $ 800 million. Housing starts are expected to be in the range of $ 2,750 million to $ 3,050 million, compared to the $ 2,300 to $ 2,700 million previously mentioned.
Prologis is focusing on strengthening its liquidity. The combined investment capacity of Prologis and its open-ended vehicles, in line with their current credit ratings, is now $ 14 billion. Its debt schedule is effectively managed with minimum maturities until 2026. In addition, the company’s credit ratings as of March 31, 2021 were A3 from Moody’s and A- from Standard & Poor’s, both with stable outlook, this which allowed him to borrow cheaply. rate. Given the strength of its balance sheet and its prudent financial management, Prologis is well placed to capitalize on growth opportunities.
As the asset class is attractive in these difficult times, development is booming in a number of markets. This high supply is likely to fuel competition and reduce pricing power. Specifically, the new supply will likely put pressure on the vacancy level, which could increase to some extent in the coming quarters.
In addition, the recovery of the industrial market has been going on for a long time and e-commerce sales growth is also expected to stabilize to some extent in the coming quarters. Therefore, any robust performance is unlikely in the short term. In fact, with comparatively smaller demand coupled with new supply, the pace of overall rental growth is likely to slow down in the coming period.
Prologis shares have outperformed the industry to which it belongs over the past three months. The shares of this company Zacks Rank # 3 (Hold) gained 18.5%, while the industry rallied 12.5% during the same period. You can see The full list of current Zacks # 1 Rank (Strong Buy) stocks here.
Image source: Zacks Investment Research
To note: Everything related to profit presented in this description represents funds from operations (FFO) – a measure widely used to assess the performance of REITs..
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Prologis, Inc. (PLD): Free Inventory Analysis Report
Duke Realty Corporation (DRE): Free Inventory Analysis Report
Terreno Realty Corporation (TRNO): Free Stock Analysis Report
Rexford Industrial Realty, Inc. (REXR): Free Inventory Analysis Report
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