Dive Brief:
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Private-equity firm Blackstone Group LP sealed a $1.5 billion deal to acquire a 12 million-square-foot portfolio of logistics centers, largely of West Coast property from CA-based LBA Realty LLC, multiple sources told the Wall Street Journal.
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Once the deal is finalized, it would be the private-equity giant's biggest purchase of U.S. distribution centers since it stepped away from the logistics business in 2015, when it sold IndCor Properties for $8.1 billion, the Journal reports.
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The news comes after Blackstone last month invested $570 million to acquire a 40% stake in retail supply chain company JDA Software, which has some 4,000 wholesale distribution or retail customers.
Dive Insight:
Blackstone is the largest private real estate owner in the world, and how it arranges its immense portfolio is a bellwether marking just how valuable retail logistics and fulfillment centers are becoming.
The timing is curious, considering that Blackstone divested itself of the U.S. logistics properties just last year with one of the largest sales of industrial property, the Journal reports. But the new deal may be driven by a hot logistics market at a time when retail is being pushed to efficiently — yet swiftly — get goods to customers, which are increasingly beginning their order process online. Retailers are under pressure to move goods not just to customer homes, but also to stores, which must have merchandise on shelves for in-store as well as omnichannel shoppers.
E-commerce growth and omnichannel efforts are pushing up demand (and prices) for prime warehouses in the U.S., especially those closer to city centers that make speedier delivery more possible, according to a report from real-estate brokerage firm CBRE Inc. released earlier this year. CBRE expects the trend to continue this year, with warehouse rents rising another 6% in the most in-demand markets. Rents for prime warehouse space in the U.S. rose 9.9% in 2015, well past the 2.8% increase in the global industrial leasing rate. Six markets in particular were among the nine with the biggest increases globally, with Oakland (29.8%) topping the increases seen in also-hot Northern New Jersey, according to the report.
“Distribution used to be just another part of the supply chain,” Charles Sullivan, president of U.S. operations for Global Logistic Properties Ltd., (the second-largest owner in the sector in the U.S.), told the Wall Street Journal. “Now logistics has moved up in its importance in corporate strategy.”