The logistics real estate sector is well-positioned to handle disruptions in the supply and demand of goods resulting from the coronavirus. This is according to Prologis in a recent report (Prologis Research Special Report: COVID-19 and Its Implications for Logistics Real Estate). The report introduces the idea that long-term lease agreements during periods of economic prosperity have served as a buffer, preventing negative cash flows resulting from short-term disruptions. It is now anticipated that short-term investments in inventory will decline as a result of the coronavirus. At the same time, however, the report’s authors argue that the current situation will lead supply chain managers to increase inventory levels to improve availability, thereby changing their view of what constitutes optimal inventory levels and locations. As a result, demand for warehouse space is expected to increase in order to build up the additional delivery capacity needed now and in the future. Prologis thus believes that the current crisis may lead companies to hold more inventory in order to ensure they can handle similar crises without their own delivery capacity being affected. At the same time, demand for other types of properties—such as offices and retail spaces—is expected to decline.
