The logistics number games

The largest deals closed or still being finalized in 2018 all involved the sale of large portfolios or companies, observes Jim Costello, senior vice president of Real Capital Analytics

Big numbers of big properties is the story of the global logistics markets in 2018. Rather than smurf together large portfolios by buying one asset at a time, investors often pursued megadeals to get at the underlying assets.

Commercial real estate investors have found the growth story around the logistics sector to be compelling. As more consumer spending shifts from bricks to clicks, investing in logistics assets is a way to tie into that activity; buying logistics assets is effectively a way to buy into the back-end of the Internet.

Single assets too small

The challenge, however, is that often the lot size for an individual logistics asset is too small for institutional investors to spend time on them. If one must deploy capital for a multi-billion-dollar portfolio, there simply is not enough time to chase down every little $5 million deal in the hinterlands of the great global cities.

To develop scale in the logistics sector, investors bought the scale of existing companies. The largest deal in 2018, for example, involved a consortium of investors from China buying out the REOC Global Logistics Property. Capital flow from China has become more nuanced in recent years given regulator concerns over excessive speculation, but a platform focused on global trade flows does not present the same sort of speculative risk as, say, condominium development.

Blackstone and Prologis are the two largest owners of logistics assets worldwide, but Prologis had the bigger deal for the year. The Prologis merger with CDT industrial involved 355 assets across the US and Mexico. The largest logistics acquisition by Blackstone involved the merger with Gramercy with 274 logistics assets located only in the United States.

With capital still hungry for the story of the logistics sector and the structural impediment to small deals, expect to see more large logistics deals in 2019.