Prologis Sees Tariffs and Trade Wars Driving Warehouse Demand

While some commercial real estate leaders express concern over the impact of tariffs and trade tensions on investment, Prologis remains optimistic, viewing the volatility as a driver of increased warehouse demand.

“These conditions can shift quickly with policy changes,” said Blackstone President and COO Jonathan Gray during a recent earnings call. “If this tariff diplomacy is resolved more quickly, I think you could see markets recover.”

Prologis, however, sees opportunity in the disruption.

“If I were to make a prediction, I’d say Mexico and Brazil will benefit the most, with a definite decline in goods coming from China,” said Hamid Moghadam, Prologis Chairman and CEO, during the company’s Q1 earnings call on April 16.

Christopher Caton, SVP and Global Head of Research, noted a growing number of customers with expansion needs.He also mentioned that some are fast-tracking shipments to stay ahead of supply chain instability.

“They require space but are waiting for more clarity on tariffs to make decisionsm” said Caton.

Prologis’s confidence comes from its focus on the consumption side of logistics rather than production.

“We’re not good at predicting tariffs or government policy,” Moghadam told The Wall Street Journal. “But we are very good at predicting consumption.”

Tim Arndt, CFO of Prologis, emphasized that despite some tariff pauses or resolutions, customers still lack a stable environment to plan effectively.

“We’ve spoken with over 300 customers, including two advisory boards representing more than 20% of our rent roll. Their message is clear,” said Arndt.

According to Arndt, many customers are accelerating shipments, rerouting volumes, and seeking overflow space.

“They’re turning to third-party logistics firms for short-term flexibility. One major 3PL told us their space utilization rose from 83% to over 90%,” said Arndt.

He added that customers are also exploring bonded warehouses and free trade zones.

“Those in food, beverage, industrial manufacturing, and essential consumer goods are more resilient and confident,” Arndt said. “But businesses tied to China-based production face the greatest uncertainty.”

 

Source: GlobeSt.