Why Top Warehouse Companies Are At War With One Another

Warehouse companies Blackstone and Prologis are battling over market dominance because of how e-commerce has dominated the space

By Charlene Badasie | Published

Since the turn of the century, warehouse companies provided an important service to the commercial real estate world. While they may lack the glamour of high-rise buildings, their safety has made them one of the hottest commodities in real estate since the end of the Great Recession. Now, two major investors are doing battle to become the most dominant warehouse player.

The first is Prologis – a public real estate investment trust with a market capitalization of $100 billion, a long history of investing in warehouse companies, 460 million square feet of space under management in the United States, and over one billion square feet globally. The other is Blackstone – an alternative-investment firm with a market capitalization of $131 billion.

Over the past 12 years, Blackstone also used its capital-deployment skills to bet big on warehouse companies, jumping from 70 million to 370 million square feet in the United States. Together, the firms have partnered on deals, tussled over them, and in less than 10 years, become the leading landlords of one of these coveted real-estate assets.

As warehousing spreads across the country, with warehouse work becoming one of the dominant forms of blue-collar employment, these companies essentially control how America gets its stuff. But the trend isn’t new. The boom traces back to 2008 when market distress created an opportunity for some of the industry’s largest players to regroup and grow. Interestingly, Prologis almost didn’t survive the Great Recession.

In 2010, The Wall Street Journal said the warehouse company had been on “life support” during the financial crisis when rent and demand dropped. But once back on its feet, it made some big strides forward. In 2011, Prologis predicted incredible rent growth in the logistics sector and became the world’s largest industrial-real-estate company through an $8.7 billion merger with AMB Property Corp.  

AMB was quick to jump on e-commerce by investing in a company called Webvan in 2000. “The idea was that we were going to capitalize on this e-commerce revolution,” Dan Letter, Prologis’ Global Head of Capital Deployment, said via Business Insider. “We were maybe a bit early, but it was definitely visionary.” After trading at a meager $9 in 2008, the warehouse company currently has one billion square feet of space worldwide and a share price of $130.

However, Prologis wasn’t the only warehouse company that saw the transformative potential of e-commerce. In 2010, Blackstone began aggressively buying cheap warehouse assets, including a $1 billion purchase of 180 properties from its counterpart. “We identified early on that the e-commerce growth we were starting to see was significant,” said David Levine, the Co-Head of America’s acquisitions at Blackstone.

That long-term vision, combined with the short-term distress of operators who couldn’t pay their debts, led to a buying spree that gave Blackstone a portfolio big enough to rival Prologis. Then in 2015, the warehouse company paused acquisitions for a year. “We were trying to do what we did in 2010, and to get a feel for how we wanted to invest since the market had changed,” Levine explained.

In 2019, Blackstone completed the largest private financial transaction ever at the time, doubling its space by beating out Prologis to purchase the U.S assets of GLP for $18.7 billion. Now, the warehouse company industry may set another record for M&A in 2022.

Prologis acquired Duke Realty for $23 billion, while Blackstone recapitalized Mileway, its European last-mile warehouse company, for $24 billion. And as new warehouse companies try to grab a slice of the lucrative real-estate commodity, the competition in the market won’t be slowing down any time soon.