A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox.
There will always be some need for massive, centralized warehouses, but rising demand for faster deliveries and resilient energy supplies have companies rethinking where their warehouses should be.
In fact, 91% of company leaders said retailers and logistics providers "urgently" need more decentralized fulfillment networks to meet delivery expectations, according to a new survey from Prologis , in partnership with the Harris Poll. Responses came from more than 1,800 business leaders in the U.S., U.K., Germany, India, China and Mexico.
"Our focus is the consumption end, so we have really narrowed our focus into being in not only the most dynamic consumption centers, most dynamic population centers around the world, but we're very specific what sub markets in those cities that we want to focus on? Because it is all about being closer to those rooftops," said Dan Letter, CEO of Prologis.
According to the survey, fewer companies plan to keep their existing global footprint, with the share falling 14 percentage points from a year ago to just 36%. They are seeking faster delivery, first and foremost, as consumer expectations escalate. Same-day delivery is the goal, with the share of companies offering it doubling since 2019. Speed tops price when it comes to securing a competitive advantage, according to the survey.
As a result, companies are mixing up their relocation strategies, with more than half both diversifying and regionalizing and about a third nearshoring and reshoring.
"That's why we've been very focused on where our portfolio is. We talk a lot about the size of our portfolio, but we've actually sold a fair amount of property over the last 15 years as well. Just property that we heard from our customers that that's not their long-term vision. So, despite having 1.3 billion feet, we actually sold over 200 million feet as well because it wasn't what our customers were looking for," Letter explained.
Energy infrastructure is also increasingly driving strategies, with energy resilience a leading concern due in part to artificial intelligence. Power reliability ranks number one in logistics location decisions. Just over a quarter of executives surveyed said they expect industrial landlords and developers to lead or fund on-site energy resilience infrastructure. That includes solar, energy storage and fleet charging.
"We really doubled down on the energy side about five years ago, and we turned it into a business," said Letter. "We have over 1.4 gigawatts of power that we generate from our solar and our storage business. And then we have also been focusing on how do we help our customers electrify their fleets."
AI is helping companies become more competitive, specifically when it comes to logistics and warehousing. Demand forecasting and agentic AI systems, respondents said, are some of the most "transformative technologies" when it comes to reshaping supply chains over the next three years. Three-quarters of those surveyed said they are planning big investments in AI demand forecasting as well as inventory replenishment.
"As they've gotten deeper on AI, we've gone deeper with them as well," said Letter. "We've been making investments alongside our customers to just understand what's next, and that helps us in all aspects of our business and be way out in front of our customers."
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