ProLogis: Only 20% of U.S. logistics space is ‘institutional grade’

Logistics real estate developer’s white paper on facility obsolescence finds the bulk of warehouses and DCs are either obsolete or too far removed from population centers and transport infrastructure.    A new white paper from the warehouse developer ProLogis studies how obsolescence impacts the commercial logistics real estate sector.
   The paper found that only around 20 percent of logistics real estate in the United States can be considered “institutional grade” – that is, properties that are neither obsolete nor too far removed from population centers or critical transport infrastructure. The amount of institutional grade space amounts to roughly 4 billion square feet.
   “The difference between institutional-grade and obsolete properties is more subtle than elsewhere in the world due to its legacy of domestic affluence and higher building standards,” ProLogis wrote. “Disentangling growth between market expansion and upgrades to institutional-grade logistics stock makes it even more challenging to measure how many properties become obsolete each year.”
   The report also suggests tracking obsolescence by merely measuring teardowns is an inexact method.
   “Scrappage occurs for a variety of reasons, including higher and better use, Class-A upgrades and infrastructure improvements such as wider highways and interchange expansions,” ProLogis wrote. “Yet, data on teardowns is limited. Teardowns focus mostly on Class-C properties that are already obsolete. A more precise estimate of obsolescence would study the rate at which institutional-grade properties age and leave the competitive pool, becoming Class-C properties and falling to alternative uses.”