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With Blackstone’s bucks behind it, Link Logistics makes its presence known

US logistics real estate firm hits 450 million square feet in 3 years

Link Logistics Chief Investment Officer Nicholas Pell with Link's Tampa, Florida facility in background (Photo: Link Logistics)

When a company like Blackstone Inc., which has $731 billion of assets under management, makes what it calls a high-conviction wager on an industry, it’s a safe bet a fast and furious avalanche of capital will be cascading into that sector.

U.S. logistics real estate, one of the nation’s hottest industries, illustrates what happens when big money meets an equally big opportunity. Logistics warehousing first hit Blackstone’s (NYSE: BX) screen more than a decade ago. Blackstone upped its U.S. logistics game in January 2019, when it formed a company called Link Logistics to invest, develop, lease and manage a portfolio of domestic industrial properties on behalf of Blackstone’s three funds involved in the sector.

Since then, New York-based Link has amassed nearly 450 million square feet of domestic logistics property, second only in size to industry leader Prologis Inc. (NYSE:PLD), which operates 612 million square feet in the U.S. and is the world’s largest owner and operator of industrial real estate. Link’s U.S. footprint of more than 3,000 properties accounts for nearly half of Blackstone’s global network. Global real estate comprises about one-third of Blackstone’s total asset base.

The catalyst in Link’s creation was Blackstone’s $7.6 billion acquisition in 2018 of real estate investment trust Gramercy Property Trust. Link was then integrated with Talos Capital, which had formed a partnership with Blackstone in 2017 to target e-commerce real estate opportunities, and with Gateway Industrial Properties, which Blackstone established the same year to acquire distribution centers.

Nicholas Pell, Link’s president and chief investment officer (CIO), held the CIO post at Gramercy before joining Link at its inception. Pell oversees Link’s U.S. industrial property investment and capital allocation strategy for Blackstone. Though Pell is intimately involved in how Blackstone spends its U.S. funding, it is the parent that ultimately pulls the deal trigger.

It would be an understatement to say that Pell monitors a burgeoning portfolio. The biggest swallow came in June 2019, when Blackstone acquired most of Singapore-based GLP’s U.S. industrial real estate assets for a staggering $18.7 billion, believed to be the largest-ever transaction of its kind between private companies. The deal added about 179 million square feet to Blackstone’s U.S. network, roughly doubling its square footage overnight. 

Through the first 11 months of 2021, Link advised Blackstone on the acquisition of $11.5 billion of U.S. property and dispositions of an additional $6.1 billion. The combined transaction amount is $3.6 billion higher than what Link had reported through October. Link has coordinated the leasing of 90 million square feet so far this year. As of the end of September, Link managed a project pipeline of 30 million square feet, which represents a $5.6 billion investment so far.

Focus on the in-fill

While Link’s access to financial resources appear unlimited, its portfolio strategy is not. In a recent interview, Pell said the company focuses on in-fill locations located in large and mature urban areas. It steers clear of investing in traditional big-box warehouses situated well outside city centers, Pell said. Nor is it especially interested in smaller markets, though it won’t exclude them. Link’s capacity sweet spot is from 100,000 square feet to 500,000 square feet and higher.  

“Our geographic bias is toward locations with large populations, or those markets with dynamic growth characteristics that are currently underserved by the existing industrial stock,” Pell said. 

Link has dipped its toe into the water of the nascent trend of buying and demolishing mid-rise, close-in suburban office parks and erecting logistics facilities on the sites. It has three projects, two in northern New Jersey and a third in California, where it is doing just that, Pell said. Profound shifts in work venues spawned by the COVID-19 pandemic may create opportunities to acquire unused or underutilized office complexes and turn them into badly needed warehouse capacity. The pandemic is “causing every business to rethink space for their employees,” Pell said.

Like other industrial real estate companies, Link has been affected by labor and material shortages that, in some cases, have forced delays in project completions. Pell wouldn’t put a time frame on when supply chain bottlenecks that have led to commodity shortages and higher costs will end. But he has no illusions about the complex issues that still must be confronted before balance is restored. “There are a lot of different things that need to happen in order for things to work out,” he said.

Beyond the pandemic’s dislocations, the macro environment remains very bullish for providers of logistics warehousing services. The events of the past 20 months, from COVID to supply chain snafus, have forced businesses to reevaluate their global distribution strategies. Increasingly, they are looking to build more buffer stock close to end U.S. markets to protect against future disruptions. That means more warehouses and more demand for Link’s services.

“There are behavioral changes that we are starting to see in our customer base” that will help sustain favorable macro conditions for warehouse suppliers, Pell said.

Leasing spreads — the difference between rents for a new lease compared to the rent previously paid for the same space — remain strongly tilted in favor of owners and lessors. Tenants continue to commit to space despite significantly escalating rents, Pell said. “We see outsized industrial demand.”

Inevitable comparisons

Link is not the only big U.S. player in the logistics warehousing market. There is Prologis, which was founded in 1983 and which is embedded in every part of logistics warehousing life. GLP, with its U.S. assets virtually depleted by its sale to Blackstone, has positioned its finances where, according to a published report, it is eyeing an initial public offering for its U.S. business. The legendary buyout firm Kohlberg Kravis Roberts (KKR) is making noise buying and selling industrial properties but on a much smaller scale.

Link’s rapid growth, and Blackstone’s deep pockets, has inevitably invited comparisons to Prologis. However, there are significant differences between the two, according to Jack Rosenberg, national director of logistics and transportation for real estate advisory Colliers International Group Inc.’s (NASDAQ:CIGI) international advisory group. Prologis has a stronger development platform, though Link has made inroads in that area, Rosenberg said. 

Link currently operates like a traditional real estate company, while Prologis is more innovative in working with tenants across its cross-functional disciplines to achieve favorable results for their enterprises, Rosenberg said. In 2018, Prologis created the Clear Lease program designed to inject simplicity and transparency into what was often a complex and opaque process. 

Under Clear Lease, tenants pay the base rate and a fixed charge that covers all operating expenses except for real estate taxes and, in Europe, utilities. The same year, Prologis rolled out the Essentials program, which leverages the company’s scale to obtain services for their tenants at a lower price than they could procure themselves.

At this stage of their life cycles, Prologis is “far ahead in innovation and services, while Blackstone is building bulk,” according to Rosenberg. Prologis declined to comment for this story.

The companies converge from different starting points. Prologis has always been a pure-play logistics warehousing specialist, while Link emerged from the financial services world. Those who believe that Link is a product of private equity and is focused just on financing may be unaware that it offers as broad a portfolio of real estate services as any company in the market, Pell said. If perceptions are different, it may be because Link is a relative newcomer and its rapid-fire growth has gone somewhat under the radar until now, he said.

Pell said that Link and Prologis have collaborated on deals and that Link has a “strong relationship” with the larger company. Industrial real estate is “a pretty collegial business,” he said.

Though the battle for U.S. logistics real estate supremacy may seem like a two-horse race given the deep-pocketed names involved, it should be remembered that the U.S. industrial property market, mostly comprised of logistics warehousing but which includes manufacturing, is estimated at 15 billion square feet, according to data from real estate services firm CBRE Services Inc. (NYSE:CBRE) That figure excludes smaller U.S. markets that the company does not count.

“The industrial real estate market is too big and fragmented for any one or two companies to dominate,” said Rosenberg. Chicago, his home city, has 1.4 billion square feet of inventory alone. At a combined 1.06 billion square feet, Link’s and Prologis’ combined holdings are “just a drop in the bucket,” he said.

(The story was updated to include the exact amount of Blackstone’s assets under management).


Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.