Blackstone battles Prologis over warehouses

For the past decade, the undisputed king of the warehouse world has been Prologis, a real estate investment trust founded in 1983. The San Francisco-based firm owns about 1 billion square feet of warehouse properties around the world. Blackstone only started buying up warehouses about 10 years ago. As recently as May 2020, the private equity firm controlled 850 million square feet. Since then, Blackstone has scooped up another 100 million square feet, putting it within striking distance of Prologis.

Blackstone’s aggressive expansion promises a new rivalry in the tight market for warehouse real estate. Data from Prologis shows warehouse vacancies hitting a record low of 3.9% in the US, even as new warehouse construction continues to grow.

Blackstone argues its warehouse business will leverage the data from all of Blackstone’s other businesses to make better investment decisions. “We operate as one globally connected business and we have a constant view into what’s happening in the markets and our portfolio,” said Caplan, the head of Blackstone’s real estate division.

Prologis is betting that its early entry into the industry, and prime real estate, will give it a durable advantage over rivals. “We’ve been in the business for 40 years and we’ve cultivated a portfolio that [includes a lot of properties near major cities],” said Cris Caton, who heads strategy and analytics at Prologis. “The new supply that comes online is farther from city centers and less competitive than the standing stock.”

Although the companies are sparring for dominance, the warehouse industry is growing so fast that there is room for more than one global player. The fiercest competition emerged in redesigning warehouses, not known as a hotbed of innovation. Prologis still has the edge there: the firm built some of the first multi-story warehouses in North America to save space in dense cities so e-commerce firms can reach urban customers faster.

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