ProLogis Signs North American Lease - Analyst Blog

ProLogis (PLD), a leading global provider of distribution facilities, has recently signed two new lease agreements spanning about 706,000 square feet in North America. The continued leasing activities in the region show signs of stabilization in the industrial property market and ProLogis remains upbeat about a strong 2011.

About 562,000 square feet were leased to an unnamed distributor in Ontario, California. With the deal, the facility is currently 100% leased. The lessee will occupy the space at ProLogis Park Ontario Airport Building Two, which is located in close proximity to the Ontario International Airport. The leased facility is strategically positioned within the Port of Long Beach Foreign Trade Zone in the western end of Inland Empire and provides easy access to national and regional highway networks across the country.

ProLogis also leased about 144,000 square feet of industrial space to an unnamed global manufacturer in Mexico City. The lessee will occupy the space at ProLogis Park Toluca Building Four, a 449,000-square-foot facility located close to the Mexico-Toluca highway. Following this deal, the facility will be also fully leased.

We maintain our ‘Neutral' recommendation on ProLogis, which presently has a Zacks #3 Rank translating into a short-term ‘Hold' rating and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.

Our long-term ‘Neutral' recommendation on the stock is based on the belief that ProLogis has considerably reduced operating risks through continued lease-up of its development portfolio. ProLogis also has a geographically diverse portfolio of distribution facilities that integrates international scope and expertise with a strong local presence in its markets, which provides strong upside potential for the company.

However, the continued troubles in the residential sector are weighing on commercial property operations. This has significantly affected the top-line growth of industrial real estate companies like ProLogis and AMB Property Corp. (AMB). AMB provides industrial distribution warehouse space in some of the busiest distribution markets in the Americas, Europe and Asia that have held up relatively well during the recession.