Industrial REITs: We Love Logistics



  • Riding the e-commerce wave, industrial REIT performance has been relentless over the past half-decade. Consumers increasingly demand speedy delivery, and retailers need industrial REITs to deliver it.
  • Industrial REITs have jumped more than 40% so far this year, on pace to outperform the broader REIT average for the fourth straight year. 3Q19 was another strong "Beat-And-Raise" quarter.
  • What Trade War? Despite continued uncertainty over trade and its impact on the supply chain, the secular tailwinds driven by domestic e-commerce has overwhelmed any trade-related headwinds this year.
  • After years of relying on internal development to fuel external growth, elevated equity valuations have allowed industrial REITs to go on a buying spree. Prologis announced two major acquisitions this year.
  • Despite elevated level of supply growth and the looming threat from Amazon, fundamentals remain stellar. With leasing spreads still seeing double-digit growth, Prologis sees robust 8-9% FFO growth through 2022.
  • This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »

REIT Rankings: Industrial

In our REIT Rankings series, we analyze REITs within each of the commercial and residential sectors, focusing on property-level fundamentals and the macroeconomic forces driving overall supply and demand conditions. We then analyze REITs based on both common and unique valuation metrics, presenting investors with numerous options that fit their own investing style and risk/return objectives.

(Co-Produced with Brad Thomas through iREIT on Alpha)

Industrial REIT Sector Overview

One of the four "major" commercial property sectors, industrial REITs comprise roughly 10% of the broad-based Real Estate ETFs (XLRE and VNQ). Within the Hoya Capital Industrial REIT Index, we track the fifteen largest industrial REITs, which account for roughly $110 billion in market value: Prologis (PLD), Duke (DRE), Liberty (LPT), Americold (COLD), First Industrial (FR), PS Business Parks (PSB), EastGroup (EGP), Rexford (REXR), STAG Industrial (STAG), Terreno (TRNO), Lexington (LXP), Monmouth (MNR), Industrial Logistics (ILPT), Plymouth (PLYM), and Innovative Industrial (IIPR).

industrial REITs

Riding the e-commerce wave, industrial REIT performance has been relentless over the past half-decade as retailers and logistics providers have invested heavily in supply chain densification and physical distribution networks in a relentless "need for speed" arms race. Importantly, it's not just Amazon (AMZN) that is making heavy investments their e-commerce business. The traditional brick-and-mortar powerhouses have honed the omni-channel approach with significant success, as Walmart (WMT), Home Depot (HD), Target (TGT), and Costco (COST) have been among the biggest investors in e-commerce distribution over the last several years. While we have raised concerns about the looming long-term competitive threat from Amazon's growing influence on the industrial real estate market, for now, the tenant roster of industrial REITs is quite diversified and includes many of the largest retailers as well as the major logistics providers including FedEx (FDX), UPS (UPS), and XPO (XPO).

logitics supply chain

Prologis segments industrial real

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