Prologis, a global leader in logistics real estate, reported its first quarter 2020 earnings results on April 21, 2020. The company’s leadership team noted that it had entered the COVID-19 period in a position of strength, with significant liquidity and borrowing capacity. Together, the quality of the Prologis portfolio, the company’s customer base and the strength of its balance sheet are expected to mitigate COVID-19 headwinds through 2020.
The impact of the pandemic will play out differently across the company’s regions, including in Europe, where occupancy levels are expected to fall by 130 basis points due to changes in supply and demand dynamics. In the first quarter, the company posted higher-than-expected rental increases; however, the forecast currently is for flat rental growth for the full year.
Prologis customers that focus on food and beverage and other everyday consumer staples are witnessing robust growth in demand while those that provide clothing, sports items, household goods and furniture are experiencing a decline in demand.
Prologis expects to move forward with fully committed speculative development and previously negotiated build-to-suit (BTS) agreements. Globally, the company has 30 BTS projects under construction and all of the underlying customers have indicated their intention to move forward as planned. This includes three new BTS starts in Germany, Italy and Poland.
The company anticipates reduced demand into the third quarter but notes that the operating environment will begin to recover toward the end of the year.
Prologis Europe first quarter activity in brief
Prologis’ European portfolio totaled 756 buildings and 18.5 million sqm, 96.0 percent occupied at the period end. Europe total development activity in the first quarter was 106,384 sqm, of this 84.1 percent was built-to-suit in key logistics markets close to consumption centres.
Central Europe (CE) key data as of March 31, 2020:
The global portfolio in the CE region totalled 4.2 million sqm (Poland, the Czech Republic, Slovakia and Hungary), including 1.9 million sqm in Poland.
Portfolio occupancy rate remains stable at 95 percent – in Poland this is set at 93 percent.
Leasing agreements were signed for more than 386,000 square meters, which corresponds to an increase of 35 percent compared to the same period last year. The Polish market accounted for 53 percent of the total agreements signed in the region (206,700 sqm).
No investments were halted in CEE.
In Central Europe, 5 buildings totalling 160,000 square meters are currently under construction: in Poland (Prologis Park Janki, Prologis Park Ruda Śląska), in the Czech Republic (Prologis Park Prague-Uzice) and in Hungary (Prologis Park Budapest-Harbor).
Building 3 at Prologis Park Nitra totalling 37,800 square meters was sold to the buyer who previously also acquired DC1 and DC2 at the same park.
Charity and Community Support
Prologis Foundation has allocated $5 million in monetary donations to COVID-19 relief organizations globally, with an emphasis on feeding those in need and assisting medical communities that have been impacted so drastically.