ProLogis Deal Signals Logistics Trend

DENVER-Locally based ProLogis, the largest industrial REIT in the world, made its biggest deal ever with the $200-million plan to develop 4.86 million sf for Unilver’s Home & Personal care Division. “Unilever is the largest network transaction we have ever done and it is the largest I am aware of done by anybody,” John Seiple, president and CEO of North America for ProLogis tells GlobeSt.com.

ProLogis has a $4.3-billion market cap and a 208.3-million-sf portfolio of industrial properties.

“It’s a big one for us,” he says about the deal to build giant warehouses for Unilever in Georgia, Pennsylvania, Texas, Illinois and California. “It’s one that really highlights our overall strategy,” Seiple tells GlobeSt.com.

And it also represents a trend that Fortune 500 and Fortune 100 companies will increasingly implement, he tells GlobeSt.com.

“This is a trend that not only will sweep corporate America, but we will increasingly see in Europe and Japan,” Seiple tells GlobeSt.com.

The Unilever deal illustrates more than just filling an immediate need for more warehouse space, he explains.

“Let’s say we get a call from a company and he says I have 25,000 sf in Denver and I need 50,000 sf,” Seiple explains. “That’s a contractual type of deal. Another way to do this is to say I’m going to step back and looks at a strategy for my entire distribution network across the country. How can I optimize my network? So I may open up new one and shut down other facilities, with an ultimate net savings…If a big company wants the lowest cost warehouse in Los Angeles, he doesn’t just want it in LA. He really wants the lowest cost in Texas and New Jersey and Illinois.”

A rule of thumb is that companies can cut their logistics costs by 5% to 7% by rethinking and streamlining their distribution network, Seiple says. But it’s more than finding the least expensive piece of ground. ProLogis, he says, will look at transportation and labor costs, carrying costs, as well as development costs.

“We model all of the different variables to reach an optimal solution,” he says.

And, once ProLogis determines where and what facilities need to be built, it can negotiate the purchase of the site, determine materials that need to be purchased, get the needed zoning and build it.