Warehouses, especially those in populated centers, are sought-after for a few reasons: More people are shopping online, space is scarce, and construction costs keep rising. According to the two companies, the net operating income generated by the warehouses is 4% of the acquisition price. But that ratio, known in the industry as the cap rate, rises to 5.75% when applying current market rents. In other words, income will rise as leases come up for renewal.
It’s a state of affairs playing out across the industry. Direct asking rents of industrial buildings have grown steadily to about $9 per square foot, from about $6 per square foot in 2019, according to commercial real estate services firm Avison Young. Meanwhile, listed real estate investment trusts which own industrial warehouses trade at a narrowing discount to net asset value, according to S&P Global Market Intelligence. In a gloomy sector, so-called big boxes are a bright spot.
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Prologis to buy industrial properties from Blackstone for $3.1 billionPrologis Inc said on Monday it has agreed to buy 14 million square feet of industrial properties from real estate funds affiliated with Blackstone for $3.1 billion in an all-cash deal.
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