Blackwells Capital Activist Presentation Deck
INDUSTRIAL REAL ESTATE INDUSTRY FUNDAMENTALS
BaML 2020 Outlook
Fundamentals suggest guidance upside to initial 2020 outlooks barring virus drag - comparing initial
guidance assumptions to market fundamentals suggests that many Industrial REITs will be in a position
to bump same store NOI and development starts guidance as the year unfolds. Note that 2019 sector
average same store NOI was +90 bps higher than initial guidance, development starts increased by 59%
and FFO increased by 3%.
BaML estimated in March 2020 that U.S. supply is likely to outpace absorption by 20-30M SF in 2020, as
it did in 2019, but with vacancy is so low that rents should still rise.
Real estate is a key component of tenant logistics strategies but comprises only 5% of total logistics
costs, according to PLD (45% transportation, 32% labor, 18% inventory). Tenants are seemingly more
sensitive to location and strategic need than rent and also recognize the impact on rent from rising
construction costs.
BaML noted in March 2020 that monitoring development pipeline pre-leased % as signals whether or not
tenants are able to find the space they need in available supply. As of March 2020, the % remained
elevated at 42% versus the historic 25-30%, suggesting they cannot.
Vacancy near historic lows at 5.1% U.S. vacancy increased +20 bps Q/Q in 4Q19 to 5.1% but U.S. rent
growth accelerated to 6.3% in 2019 from 4.7% in 2018. Excess supply is concentrated in select
submarkets.
Source: BaML 2020 Industrial Real Estate Outlook.
BW BLACKWELLS CAPITAL
Strictly Confidential & Trade Secret
87View entire presentation