By Jon Peterson
San Francisco-based Prologis has received new commitments from major institutional investors totaling $325 million that will go into its Prologis Targeted U.S. Logistics fund, as stated by the two new investors in public documents.
The new commitments were $300 million from the New York State Common Retirement Fund and $25 million from the Ohio Bureau of Workers Compensation Fund.
Prologis declined to comment when contacted for this story.
New York Common believes now is a good time to be investing additional capital into industrial assets in general. The pension fund wrote in an email that “Industrial asset fundamentals are strong and projected to remain strong for the next several years.”
Ohio BWC has similar investment opinions on industrial. This investor wrote in a board meeting document that the industrial property sector has been the best of the four main property types over the past three years and is forecasted by many market researchers to continue to offer the highest returns over the next three to five years.
This is due to the very strong fundamentals that define the industrial real estate sector at the moment. There is strong demand for space in many capacity-constrained markets giving landlords pricing power. Another important factor has been constrained supply. The national vacancy rate in industrial assets across the United States is hovering around 4.6 percent, which is near an all-time low.
At the same time, Prologis has achieved strong, above-average returns for its commingled fund to date. The one-year return for the commingled fund is 23.19 percent through the end of March 2018, as stated in the Ohio BWC board meeting document. This compares to the NFI-ODCE Index return of 8.16 percent for the same time period.
The US Logistics fund was first created by Prologis in 2004. It has a net asset value of $7.3 billion, as of the end of March 2018.
For its commingled fund, Prologis focuses on the top 9 U.S. logistics markets. Its assets in these markets make up 80.2 percent of the fund’s portfolio. This includes 7.2 percent in the San Francisco Bay Area and 11.8 percent in Seattle. Its other main markets are Southern California, New York/New Jersey, Chicago, South Florida, Houston, Dallas and Baltimore.
Prologis concentrates on properties that are in infill locations in close proximity to the most active seaports, airports, rail lines and major freeway interchanges. The US Logistics Fund has 98.7 percent of its portfolio in industrial assets with the other 1.3 percent invested in land.