WEBVTT - Link Sees Warehouse Demand Building 0:00:00.630 --> 0:00:09.130 Thank you. Hi, everyone. This is Lee Klaskow, and we're 0:00:09.150 --> 0:00:12.820 Talking Transports. Welcome to Bloomberg Intelligence Talking Transports podcast. I'm 0:00:12.840 --> 0:00:16.239 your host, Lee Klaskow, Senior Freight Transportation and Logistics Analyst 0:00:16.320 --> 0:00:20.099 at Bloomberg Intelligence, Bloomberg's in-house research arm. Before we dive in, 0:00:20.120 --> 0:00:22.260 a quick favor. If you enjoy the podcast, please take 0:00:22.300 --> 0:00:25.100 a moment to follow, rate, review, and share it with 0:00:25.460 --> 0:00:28.560 a friend or a colleague. Your support helps us continue 0:00:28.600 --> 0:00:32.800 to bring you conversations with leaders shaping transportation and logistics. 0:00:33.300 --> 0:00:34.760 And if you'd like to connect, you can find me 0:00:34.920 --> 0:00:37.150 on the Bloomberg Terminal on LinkedIn or on X at 0:00:37.190 --> 0:00:42.500 Logistics League. Joining us today is Luke Petherbridge, CEO of 0:00:42.620 --> 0:00:45.820 Link Logistics, one of the largest owners and operators of 0:00:45.860 --> 0:00:49.920 logistics real estate in the United States. Warehouses are a 0:00:50.010 --> 0:00:54.390 critical link in the freight transportation network, connecting ports, railroads, 0:00:54.710 --> 0:00:58.530 and highways with businesses and consumers. That gives Luke and 0:00:58.570 --> 0:01:01.810 his team a unique view into freight flows, inventory trends, 0:01:02.010 --> 0:01:05.290 supply chain investments, and the broader economy. Today, we'll talk 0:01:05.310 --> 0:01:09.190 about the outlook for logistics real estate, what links customers 0:01:09.250 --> 0:01:11.710 are telling them about the economy and the freight markets, 0:01:12.330 --> 0:01:16.600 and how Technology and AI are changing warehouses. And also, 0:01:16.880 --> 0:01:20.440 where Luke sees opportunities for growth. Luke, welcome to Talking Transports. 0:01:20.800 --> 0:01:23.759 Well, thank you for having us, Leigh. We really appreciate it. 0:01:24.150 --> 0:01:27.569 Yes, my pleasure. You know, not everyone might be familiar 0:01:27.730 --> 0:01:29.850 or listeners might not be familiar with Link Logistics. If 0:01:29.870 --> 0:01:32.810 you can give us an overview of the company, its portfolio, 0:01:32.870 --> 0:01:34.160 and kind of the customers that you serve. 0:01:34.970 --> 0:01:36.710 Yeah, absolutely. Well, I think you did a pretty good 0:01:36.750 --> 0:01:38.690 job giving the high level. We are one of the 0:01:38.730 --> 0:01:44.590 largest owners and operators of warehouses, particularly last mile infill 0:01:44.630 --> 0:01:48.730 warehouses in the country. We have a little over 350 0:01:48.730 --> 0:01:53.020 million feet of real estate in 50 different markets. We 0:01:53.040 --> 0:01:58.460 have about 8,000 customers. So whether that's the largest e-commerce, retailers, 0:01:58.560 --> 0:02:03.610 transport companies in three PLs down to small business America. 0:02:04.210 --> 0:02:07.910 So we really serve everyone across the country. We have 0:02:07.910 --> 0:02:11.290 1100 teammates that are based throughout the country. But a 0:02:11.550 --> 0:02:13.889 good way to think of it is like three to 4% 0:02:13.889 --> 0:02:18.540 of US GDP flows through our customers in our building. 0:02:18.560 --> 0:02:20.380 So I think we do have a pretty nice purview 0:02:20.419 --> 0:02:22.960 and we're really humble that we can support the economy 0:02:22.980 --> 0:02:23.460 the way we do. 0:02:24.000 --> 0:02:27.020 That's awesome. And a quick question. So are you predominantly 0:02:27.760 --> 0:02:29.480 your footprints in the United States? Do you have anything 0:02:29.500 --> 0:02:30.260 outside the US? 0:02:30.860 --> 0:02:33.880 We're in North America. So we operate predominantly in the 0:02:33.900 --> 0:02:38.040 United States, but then in Canada, Pure Industrial is part 0:02:38.060 --> 0:02:39.799 of Lynx. So we operate in Canada under the Pure 0:02:39.820 --> 0:02:40.600 Industrial banner. 0:02:41.040 --> 0:02:43.420 Okay. You know, Link has become one of the largest 0:02:43.500 --> 0:02:46.889 operators of logistics real estate in the U.S. What's been 0:02:46.910 --> 0:02:49.190 the biggest driver for growth? Are you growing more through 0:02:49.350 --> 0:02:53.970 M & A of existing companies or just buying up assets? 0:02:54.730 --> 0:02:56.589 It's probably a little bit of both. If you think 0:02:56.630 --> 0:02:59.570 of the last five years, we've really sort of grown 0:02:59.630 --> 0:03:04.280 and scaled our business. We started in 2019, so we're 0:03:04.290 --> 0:03:08.459 only nearly seven years old as a firm. And a 0:03:08.500 --> 0:03:11.200 lot of it was through very large acquisitions. We are 0:03:11.240 --> 0:03:15.840 a Blackstone portfolio company, so very large corporate acquisitions. We've 0:03:15.860 --> 0:03:18.859 bought a lot of one-off buildings or portfolios. And then 0:03:18.880 --> 0:03:21.859 we have built a pretty sizable development pipeline where we've 0:03:21.880 --> 0:03:26.730 delivered over 30 million feet of brand new class A 0:03:27.210 --> 0:03:31.720 LEED certified buildings around the country. So it's a little 0:03:31.740 --> 0:03:35.440 bit of everything. And we've been operating in most of 0:03:35.460 --> 0:03:36.000 the markets. 0:03:36.580 --> 0:03:38.220 And when you say development in your world, are you 0:03:38.260 --> 0:03:41.540 talking about like creating an industrial park, a logistics park 0:03:41.600 --> 0:03:44.480 out of not thin air, but like, you know, greenfielding 0:03:44.540 --> 0:03:45.700 or brownfielding? 0:03:45.740 --> 0:03:48.540 Yeah, absolutely. Yeah. So we can, you know, development, whether 0:03:48.590 --> 0:03:52.170 it's an industrial park, multiple buildings, a brand new standalone building, 0:03:52.210 --> 0:03:55.920 but Yeah, these are brand new buildings we've developed. We've 0:03:55.960 --> 0:03:59.240 also done redevelopment where you take down older inventory and 0:03:59.280 --> 0:04:02.520 replace it with brand new class A buildings. But yeah, 0:04:02.620 --> 0:04:05.260 we've developed land into new industrial buildings. 0:04:05.900 --> 0:04:07.460 And are there part of the countries where you're seeing 0:04:07.500 --> 0:04:10.080 more growth in terms of these new opportunities? 0:04:10.820 --> 0:04:14.370 Yeah, I think, look, it varies over the different parts 0:04:14.390 --> 0:04:17.690 of the cycle. I'd say right now, what we've really 0:04:17.750 --> 0:04:21.820 started to see is when you think of the demand profile, 0:04:21.839 --> 0:04:25.220 there's probably a few things that really sort of stand out, 0:04:25.620 --> 0:04:28.430 which then regionally will focus it. You know, whether it's 0:04:28.460 --> 0:04:32.350 the continued proliferation of e-commerce, you know, whether that's, you know, 0:04:32.450 --> 0:04:36.390 generational shift in about a decade, 50% of Americans will 0:04:36.410 --> 0:04:39.710 have grown up with Amazon Prime. We continue to see, 0:04:39.730 --> 0:04:43.410 you know, Walmart and Amazon and others really focus on speed. 0:04:43.570 --> 0:04:46.229 That continues to be a growth lever. We are now 0:04:46.290 --> 0:04:50.110 starting to see, you know, onshoring and nearshoring impacts. There's 0:04:50.130 --> 0:04:54.510 been almost a trillion dollars of announced factories throughout the 0:04:54.570 --> 0:04:57.870 United States. As you well know, once you sort of 0:04:57.930 --> 0:05:00.920 put a big factory, think of Tesla in Austin, there's 0:05:00.960 --> 0:05:04.180 a whole supply chain and network that gets built around that, 0:05:04.260 --> 0:05:08.360 that normally resides in warehouses. And then more recently, you know, 0:05:08.380 --> 0:05:11.740 with the data center boom that's going on, There's a 0:05:11.779 --> 0:05:15.700 whole supply chain, like data center spillover demand is really 0:05:15.740 --> 0:05:17.660 starting to happen. So those three things, if you think 0:05:17.720 --> 0:05:22.480 where that's coalescing, we're seeing that specifically in Texas, the 0:05:22.520 --> 0:05:26.840 southeast corner of the United States, and even that onshoring 0:05:26.880 --> 0:05:30.580 and nearshoring is now starting to matriculate west, whether it's 0:05:30.660 --> 0:05:34.700 Phoenix around the TSMC plan or data center build out there. 0:05:34.760 --> 0:05:37.400 So we're really seeing it in sort of Texas and 0:05:37.460 --> 0:05:40.120 west is sort of the latest growth trend. 0:05:40.640 --> 0:05:43.190 And does your footprint, do you be outside of like 0:05:43.230 --> 0:05:46.930 supporting the data centers? I mean, do you guys have 0:05:46.970 --> 0:05:50.070 warehouses that people buy to convert into data centers that 0:05:50.290 --> 0:05:51.210 you lease to them? 0:05:52.010 --> 0:05:55.750 Not yet. We really haven't seen, I mean, obviously data 0:05:55.770 --> 0:05:58.330 centers are, and I'm sort of, this is obviously not 0:05:58.390 --> 0:06:03.290 exactly our asset class. They're highly specialized buildings. You know, 0:06:03.350 --> 0:06:05.849 an industrial building is a little different. So it's more, 0:06:06.070 --> 0:06:08.370 if you think of the data center spillover, what I'm 0:06:08.430 --> 0:06:11.650 talking about, It could be 3PLs that are holding the 0:06:11.730 --> 0:06:14.750 racks and servers that go into the data centers. It 0:06:14.790 --> 0:06:18.650 could be industries that are actually building cooling towers or 0:06:18.730 --> 0:06:24.620 switchgear or electrical panels or generators or turbines. I think 0:06:24.640 --> 0:06:27.359 of all the component parts that are being built and 0:06:27.400 --> 0:06:30.520 going into this very, very large fiscal expansion in the 0:06:30.820 --> 0:06:36.790 country or That flows into what I consider the industrial complex, 0:06:36.850 --> 0:06:38.410 and that obviously sits in warehouses. 0:06:38.950 --> 0:06:41.750 The nearshoring and onshoring trends that you're seeing, have they 0:06:41.830 --> 0:06:43.990 cooled a little bit? Because it seems like they really 0:06:44.029 --> 0:06:46.170 had a lot of momentum five or six years ago, 0:06:46.270 --> 0:06:48.960 and then all of a sudden we're spatting with our 0:06:49.020 --> 0:06:50.960 partners to the north and to the south of us, 0:06:51.000 --> 0:06:54.159 so it seems like people are taking a wait-and-see approach. 0:06:54.180 --> 0:06:57.219 Are you still seeing the kind of similar intensity of 0:06:57.260 --> 0:07:02.260 people interested in expanding their warehouses industrial footprint here in 0:07:02.279 --> 0:07:02.839 the United States? 0:07:03.800 --> 0:07:06.020 Yeah, I think there was a lot of talk four 0:07:06.040 --> 0:07:08.400 or five years ago. I think when you look at 0:07:08.460 --> 0:07:13.140 these sort of supply chain or manufacturing decisions, these are 0:07:13.320 --> 0:07:16.610 decade-long decisions because you build out very large plants, it's 0:07:16.640 --> 0:07:21.430 highly capital intensive. So yes, we're still seeing that, maybe 0:07:21.490 --> 0:07:24.870 not with the velocity that we saw a while ago, 0:07:24.890 --> 0:07:30.050 but it's still prevalent, whether it's pharmaceuticals, EVs, batteries, solar panels. 0:07:30.760 --> 0:07:33.460 And now more recently, all the chip fabs that have 0:07:33.500 --> 0:07:37.180 sort of been put into Phoenix and around Austin, they 0:07:37.200 --> 0:07:40.260 will have a spillover. But I think when you think 0:07:40.280 --> 0:07:43.800 of our business, the factory is one part or the 0:07:43.860 --> 0:07:48.060 manufacturing that's coming back, the supply chain and the network 0:07:48.110 --> 0:07:51.770 that's needed, there's normally a lag. So I'd say all 0:07:51.810 --> 0:07:55.590 the announcements and the investment that was made three to 0:07:55.630 --> 0:07:58.830 five years ago is starting to build that demand in 0:07:58.850 --> 0:08:02.850 the supply chain network that's proliferating the country now. So 0:08:02.870 --> 0:08:07.660 we're still seeing pretty solid demand from suppliers that supply 0:08:07.680 --> 0:08:11.160 into the sort of growing onshoring and manufacturing base here 0:08:11.180 --> 0:08:11.740 in the country. 0:08:12.390 --> 0:08:15.620 You mentioned earlier that e-commerce is driving the need for 0:08:15.660 --> 0:08:19.860 speed when it comes to delivery, whether you're Walmart or Amazon. Obviously, 0:08:20.000 --> 0:08:22.700 to do that, you get closer to your customer. How 0:08:22.820 --> 0:08:26.720 has that impacted your portfolio in terms of properties that 0:08:26.740 --> 0:08:30.590 you're looking at? Are you looking at smaller properties in 0:08:31.150 --> 0:08:33.770 suburbia America versus 50 miles in more rural areas? 0:08:39.110 --> 0:08:42.630 Yeah, I mean, I would say we really focused on 0:08:42.830 --> 0:08:46.120 owning the infill last mile. So location matters, I think 0:08:46.170 --> 0:08:50.020 is what you're saying there. You really touched on speed. 0:08:50.580 --> 0:08:53.739 If you think about the consumer expectation, and it's not 0:08:53.900 --> 0:08:59.570 just e-commerce, I would say replenishing store networks, Even parts 0:08:59.590 --> 0:09:03.740 to factories, that speed of the network is now so 0:09:03.790 --> 0:09:06.420 much more important. What used to be acceptable to deliver 0:09:06.480 --> 0:09:10.020 something in three to five days is now 24 hours. 0:09:10.100 --> 0:09:13.260 The way to do that is more inventory closer to 0:09:13.300 --> 0:09:16.760 the consumer. So when you think of, I would say 0:09:16.780 --> 0:09:19.740 the size of the building is secondary to location, but 0:09:19.880 --> 0:09:23.700 normally what happens is as you try to get closer in, 0:09:23.800 --> 0:09:27.740 like in Phil Dallas, in Phil Chicago, infield jersey infield 0:09:27.760 --> 0:09:32.309 atlanta they're normally smaller buildings and when i say smaller 0:09:32.330 --> 0:09:35.390 they're not million footers they're still hundreds of thousands of 0:09:35.429 --> 0:09:38.910 feet size buildings and what we found is our partners 0:09:38.950 --> 0:09:42.250 and customers are able to use those buildings as nodes 0:09:42.809 --> 0:09:46.209 as well as the middle mile larger facilities so yes 0:09:46.270 --> 0:09:49.580 we really focused on owning more infield real estate it's 0:09:49.650 --> 0:09:52.660 harder to replicate it's closer to the consumer and we 0:09:52.679 --> 0:09:54.520 think that is the path of travel for a lot 0:09:54.559 --> 0:09:56.850 of these e-commerce providers And. 0:09:56.830 --> 0:10:00.940 Is Link Logistics a landlord or are you providing services 0:10:01.040 --> 0:10:04.719 in addition to just leasing out the square footage, if 0:10:04.740 --> 0:10:05.620 you can talk about that? 0:10:05.740 --> 0:10:10.120 We're just a landlord. So we partner with our customers, 3PLs, 0:10:10.400 --> 0:10:15.210 e-commerce providers, retailers, manufacturers. We're the landlord. 0:10:15.790 --> 0:10:18.970 Gotcha. And, you know, you mentioned you're a Blackstone company. 0:10:19.990 --> 0:10:21.969 So what does that mean for you guys? Is this 0:10:22.010 --> 0:10:25.610 something where, you know, they're holding all their logistics assets 0:10:25.690 --> 0:10:27.990 in one business or is this like a company where, 0:10:28.270 --> 0:10:30.890 you know, they continue to consolidate the market and, you know, 0:10:30.929 --> 0:10:32.970 obviously you guys have grown a lot and maybe it 0:10:33.130 --> 0:10:34.850 becomes a standalone public company? 0:10:35.450 --> 0:10:40.910 Yeah, so we are Blackstone's North American industrial real estate company. 0:10:41.050 --> 0:10:43.380 As we buy things, we add it to our portfolio. 0:10:44.350 --> 0:10:47.290 We manage the real estate on behalf of Blackstone's funds. 0:10:47.840 --> 0:10:51.920 We're really focused more on internal organic growth, whether it's 0:10:51.980 --> 0:10:55.800 growing our customers, redeveloping buildings, adding new buildings to our 0:10:55.840 --> 0:10:59.860 network that we think our customers want to use both now, 0:10:59.920 --> 0:11:03.910 but then also in the future. And owning the real estate, 0:11:03.929 --> 0:11:07.030 the path of growth, I think has been really our focus. 0:11:07.550 --> 0:11:10.050 The benefit of Blackstone is you are part of a 0:11:10.110 --> 0:11:16.010 global network that has enormous access to information, access to capital, 0:11:16.590 --> 0:11:20.230 and that information and capital with our local operating expertise 0:11:20.370 --> 0:11:24.250 really has been a potent combination to be able to 0:11:24.309 --> 0:11:27.220 grow a business and own a portfolio that we think 0:11:27.280 --> 0:11:28.439 is very, very unique. 0:11:29.360 --> 0:11:32.120 So how did you originally get into the logistics real 0:11:32.160 --> 0:11:32.700 estate game? 0:11:33.350 --> 0:11:35.270 Yeah, so I used to work, I've been working for 0:11:35.309 --> 0:11:37.280 Blackstone for a little over a decade. I've worked at 0:11:37.300 --> 0:11:39.940 a few different portfolio companies in retail. So I was 0:11:39.980 --> 0:11:42.760 probably in the store world for a long time, like 0:11:42.800 --> 0:11:46.040 a retail landlord. And then about six years ago, I 0:11:46.059 --> 0:11:48.470 had the opportunity to move over to Link Logistics. And, 0:11:49.030 --> 0:11:52.130 you know, with incredible partners here and partnership at Blackstone, 0:11:52.150 --> 0:11:55.750 we've been able to grow a business into a pretty 0:11:55.830 --> 0:11:57.730 scalable and sizable platform now. 0:11:58.090 --> 0:12:02.350 And when you guys are looking to buy existing assets, 0:12:02.490 --> 0:12:06.030 is the market reasonably priced? Would you deem it as 0:12:06.110 --> 0:12:09.050 expensive from a historical standpoint? I guess you're pricing everything 0:12:09.130 --> 0:12:10.370 on a square footage basis. 0:12:11.090 --> 0:12:13.309 Yeah, I think there's a few different ways you can 0:12:13.370 --> 0:12:17.960 price it. Obviously, square footage is one versus replacement cost. 0:12:17.980 --> 0:12:21.070 You can look at yield. You know, I think it's fairly, 0:12:21.090 --> 0:12:23.640 I would say the benefit of being in such a 0:12:23.720 --> 0:12:29.040 large asset class is it's fairly efficient. It reprices pretty efficiently. 0:12:29.120 --> 0:12:32.920 Right now, I think, you know, the capital markets remain 0:12:32.980 --> 0:12:37.080 fairly liquid. There's a significant number of buyers and sellers. 0:12:37.140 --> 0:12:42.380 I think the asset class, partly because of the multifaceted demand, 0:12:42.420 --> 0:12:46.170 I sort of talked about e-commerce, onshoring and nearshoring, but 0:12:46.210 --> 0:12:49.590 then also this new demand from data center spillover, as 0:12:49.630 --> 0:12:53.670 well as just general GDP growth. We're also now, as 0:12:53.750 --> 0:12:57.060 a sector, there's limited new supply coming online right now. 0:12:57.140 --> 0:12:59.240 It's starting to tick back up, but it's well off 0:12:59.780 --> 0:13:04.740 historical highs back in 21, 22. So you have good demand. 0:13:05.640 --> 0:13:09.460 You have significantly lower new supply. That sets up pretty 0:13:09.620 --> 0:13:12.620 constructive sort of view of the sector. So What we've 0:13:12.660 --> 0:13:15.439 seen from a transactional point of view, there is significant 0:13:15.460 --> 0:13:19.800 amount of capital looking to deploy into North American industrial. And, 0:13:19.920 --> 0:13:22.420 you know, we're trying to do that. We're also selling 0:13:22.440 --> 0:13:25.140 from some of the older funds, but it's a pretty 0:13:25.220 --> 0:13:30.150 functioning and capital. There's no real constraint on capital in 0:13:30.170 --> 0:13:31.270 this market at the moment. 0:13:32.250 --> 0:13:34.969 And, you know, you mentioned about supply, limited amount of 0:13:35.010 --> 0:13:38.510 new supply. Is that because construction costs are so high 0:13:38.590 --> 0:13:42.440 or is that because the environmental impact difficulties in trying 0:13:42.460 --> 0:13:46.340 to find a spot and getting the approval? What's creating 0:13:46.400 --> 0:13:47.360 the lack of supply? 0:13:47.380 --> 0:13:50.940 I think there's a few things there. One is, yes, 0:13:51.000 --> 0:13:55.880 costs are going up, whether it's labor or steel. Also, 0:13:55.960 --> 0:13:58.849 I think just a number of, like, we probably oversupplied 0:13:58.910 --> 0:14:03.010 the industrial market. Post-COVID, everyone started to become a developer. 0:14:03.610 --> 0:14:07.170 we as a sector developed a lot in America. We 0:14:07.190 --> 0:14:11.740 probably oversupplied. So there's been this reabsorption moment. Rates are higher. 0:14:11.760 --> 0:14:14.640 So I wouldn't just say hard costs, interest rates make 0:14:14.700 --> 0:14:17.800 it a little more expensive for developers to develop. So 0:14:17.840 --> 0:14:20.360 we've seen a pullback in development. It's not zero, but 0:14:20.400 --> 0:14:24.520 it's just significantly off this booming new supply. And so 0:14:24.540 --> 0:14:28.950 you have good demand, limited new or lower new supply. 0:14:29.090 --> 0:14:31.770 It just, it sets up a pretty constructive forward look 0:14:31.810 --> 0:14:32.390 on this sector. 0:14:33.130 --> 0:14:36.130 And when you're managing the portfolio, generally speaking, when you're 0:14:36.150 --> 0:14:40.300 looking to sell, what makes you guys decide, oh, we 0:14:40.340 --> 0:14:44.260 want to sell this asset? What kind of goes into 0:14:44.300 --> 0:14:44.960 that decision? 0:14:45.600 --> 0:14:48.040 I think there's a few things. One could be the 0:14:48.080 --> 0:14:51.340 life cycle of the asset in a fund for our investors. 0:14:51.920 --> 0:14:54.210 Another one could be there's a higher and better use 0:14:54.250 --> 0:14:58.010 with someone else. Or we've captured, we are a real 0:14:58.030 --> 0:15:00.630 estate investor, we've captured the value of the asset at 0:15:00.670 --> 0:15:04.050 that moment. And the best long-term capital source might have 0:15:04.090 --> 0:15:07.650 a lower cost of capital than ours. So there's multiple 0:15:07.690 --> 0:15:10.450 different avenues. But at the same time, while we're selling, 0:15:11.030 --> 0:15:14.110 we are a pretty active buyer too. So it can 0:15:14.150 --> 0:15:16.650 sometimes be a little confusing where Link's buying and selling 0:15:16.690 --> 0:15:19.250 at the same time, but it just depends on what 0:15:19.430 --> 0:15:22.910 fund each of the assets sit in and realization schedules. 0:15:23.470 --> 0:15:26.170 And how leveraged do you guys go when you're buying 0:15:26.210 --> 0:15:28.320 a new asset? 0:15:28.980 --> 0:15:34.560 It varies by fund, but moderate leverage across our fund base, 0:15:34.620 --> 0:15:36.660 like around 50%. 0:15:36.660 --> 0:15:40.950 50%, gotcha. Could you talk about, are customers still carrying 0:15:41.050 --> 0:15:45.710 more inventory and building greater redundancy in their supply chains, 0:15:45.770 --> 0:15:50.440 or has the pendulum swung back towards focusing on more 0:15:50.500 --> 0:15:51.880 efficiencies and costs? 0:15:52.580 --> 0:15:57.510 I think post-COVID, obviously, everyone swung very hard to safety stock. 0:15:57.670 --> 0:15:59.890 It has moved back. I don't think it's come all 0:15:59.910 --> 0:16:04.420 the way back to wildly efficient. I think the reason 0:16:04.460 --> 0:16:07.600 for that is risk is still very much apparent in 0:16:07.620 --> 0:16:10.430 the supply chain network, whether it's what's happening in the 0:16:10.470 --> 0:16:15.850 Middle East, what's happened in other, whether it's tariffs or 0:16:15.910 --> 0:16:21.150 political uncertainty, geopolitics, I think all our customers continue to 0:16:21.210 --> 0:16:25.330 focus on just managing their risk profile. And when you 0:16:25.350 --> 0:16:29.390 think of supply chain networks, what that generally means is 0:16:29.450 --> 0:16:32.090 own a little more closer to the end destination. So 0:16:32.130 --> 0:16:35.890 we still see Customers being thoughtful about, you know, just 0:16:36.050 --> 0:16:39.470 inventory levels. I don't think they're at safety stock sort 0:16:39.510 --> 0:16:43.230 of levels, but they've been pretty thoughtful about where they are. 0:16:43.430 --> 0:16:46.840 I think it's also where some of this production is 0:16:46.890 --> 0:16:50.260 coming from, what ports they're using, where they actually are 0:16:50.320 --> 0:16:54.200 locating goods around the country. They're not getting isolated with 0:16:54.340 --> 0:16:57.260 one port of entry. And I think some big retailers 0:16:57.320 --> 0:17:00.300 really have sort of expanded to the four corner strategy. 0:17:00.340 --> 0:17:02.520 And we're seeing that working pretty well for them. 0:17:02.940 --> 0:17:05.119 And, you know, just generally speaking, you know, when you 0:17:05.140 --> 0:17:09.929 guys are increasing rents or releases, what kind of increase 0:17:10.010 --> 0:17:11.189 are you guys getting? 0:17:11.530 --> 0:17:14.970 Yeah, I mean, it varies by market. Every market, you know, 0:17:14.990 --> 0:17:17.770 it's sort of rolling to market rents. But, you know, 0:17:17.810 --> 0:17:21.230 it varies economics, like what the old lease was, how 0:17:21.320 --> 0:17:22.800 old the old lease was. So it would be very 0:17:22.840 --> 0:17:26.020 hard to specifically call one. I think rents, though, if 0:17:26.060 --> 0:17:28.520 you said market rents in the United States, which is 0:17:28.560 --> 0:17:31.180 probably a better way to think about it, I think 0:17:31.260 --> 0:17:33.859 market rents have been sort of flat for the last 0:17:33.920 --> 0:17:36.880 year and they feel like they're starting, like more recently, 0:17:36.900 --> 0:17:39.600 we're starting to see some growth across the country. But, 0:17:40.200 --> 0:17:44.040 you know, that's wildly different between Dallas. You're seeing strong 0:17:44.080 --> 0:17:47.920 rent market rent growth, where other markets that have, you know, 0:17:47.980 --> 0:17:51.160 significant amount of supply and they're reabsorbing a flat bit 0:17:51.200 --> 0:17:52.040 like the West Coast. 0:17:52.560 --> 0:17:54.350 Are you guys involved at all in temperature control? 0:17:54.900 --> 0:17:57.600 We have a little bit of cold storage, but we're 0:17:57.640 --> 0:18:00.859 not a huge cold storage operator. I think what we 0:18:00.900 --> 0:18:05.400 found is that's highly operationally intensive and there's other companies 0:18:05.460 --> 0:18:08.210 that have been very much specifically focused on that. 0:18:08.570 --> 0:18:11.490 And so, you know, you kind of mentioned some of 0:18:11.510 --> 0:18:15.810 the nearshoring trends. A lot of folks kind of put 0:18:15.850 --> 0:18:18.630 their money on Mexico as where a lot of manufacturing 0:18:18.670 --> 0:18:25.480 might go. Outside of having properties along the border in Texas. 0:18:25.520 --> 0:18:28.160 Do you guys have anything south of the border? 0:18:28.720 --> 0:18:31.000 We do not own anything in Mexico. 0:18:31.400 --> 0:18:34.300 Is that like an opportunity or there's a reason? There's 0:18:34.320 --> 0:18:35.660 a very good reason why you're not there. 0:18:36.119 --> 0:18:39.330 No, I think it absolutely is an opportunity. We've looked 0:18:39.400 --> 0:18:43.630 at it. I mean, Blackstone invests globally. So it absolutely 0:18:43.650 --> 0:18:46.790 is something that we have looked at with them. We own, 0:18:46.990 --> 0:18:50.460 we're a sizable owner in El Paso. We just haven't 0:18:50.520 --> 0:18:53.480 found the right opportunity in Mexico yet. 0:18:53.520 --> 0:18:58.629 When you guys are developing a new property, I'm assuming 0:18:58.690 --> 0:19:00.730 there's a lot that goes into the decision of where 0:19:00.750 --> 0:19:03.770 you're doing it. Can you just talk about those inputs 0:19:03.850 --> 0:19:06.959 and on what makes, whether it's a brownfield or a greenfield, 0:19:07.000 --> 0:19:10.440 an attractive place to build in a logistics park? 0:19:11.210 --> 0:19:12.889 Yeah, I think the first thing I would say is 0:19:12.990 --> 0:19:16.090 where's the demand going? And so what we really tried 0:19:16.130 --> 0:19:19.890 to do is own land in locations where we think 0:19:19.930 --> 0:19:24.010 demand is, whether that is in infill New Jersey, Boston, 0:19:24.030 --> 0:19:28.909 we're building something right now in Miami, right near the 0:19:28.950 --> 0:19:31.820 Hard Rock Stadium. We're really trying to find that where 0:19:31.859 --> 0:19:36.400 we think demand will start to either emerge or move to, 0:19:36.720 --> 0:19:39.980 and that generally is close to the end consumer or 0:19:40.000 --> 0:19:44.129 the user's and consumer. And then when we look at that, obviously, 0:19:44.170 --> 0:19:46.300 then you need to see what are the rents we 0:19:46.320 --> 0:19:48.790 can achieve in that market for a brand new class 0:19:48.869 --> 0:19:52.040 A building? What do we think the long-term value of 0:19:52.080 --> 0:19:55.100 that opportunity would be? And then the cost. And then 0:19:55.619 --> 0:19:58.460 if there's economic reasons to do it, we can lean in. 0:19:58.500 --> 0:20:01.340 So we are developing a number of sites right now 0:20:01.380 --> 0:20:04.460 where we think that the economics make sense. But I'd 0:20:04.480 --> 0:20:06.820 say the number one reason of where we will develop 0:20:06.840 --> 0:20:10.639 or the number one commonalities, where do we think demand 0:20:10.680 --> 0:20:14.500 will start to proliferate? And generally, we find that infill, 0:20:15.180 --> 0:20:17.959 infill developments is where the opportunity exists. 0:20:18.480 --> 0:20:20.560 And is there a part of the country where the 0:20:20.640 --> 0:20:26.990 economics are the most attractive, where that intersection between cost 0:20:27.070 --> 0:20:28.770 and opportunity meet? 0:20:29.630 --> 0:20:31.030 Yeah, I think there the market is just saying the 0:20:31.070 --> 0:20:34.810 biggest demand. I think in Dallas or Texas in general, 0:20:34.830 --> 0:20:39.380 but Dallas has a real opportunity. I think Southeast Florida, 0:20:39.520 --> 0:20:42.180 there's an opportunity due to the fact it's very, very 0:20:42.240 --> 0:20:45.900 hard to build there. There's limited land. There's growing consumption 0:20:45.940 --> 0:20:50.940 and population. I think in South Bay, LA remains pretty 0:20:51.000 --> 0:20:54.430 attractive with all the aerospace and defense that's starting to 0:20:54.490 --> 0:20:58.350 appear in that particular market. So there's a handful of markets. 0:20:58.369 --> 0:21:01.920 They all have different reasons, but Markets that have, it's 0:21:02.000 --> 0:21:06.210 difficult to supply with growing consumption, you seem to find 0:21:06.230 --> 0:21:08.670 those two things, as you mentioned, start to cover less. 0:21:09.510 --> 0:21:13.070 Right. And when you guys are using technology or developing 0:21:13.109 --> 0:21:18.280 technology for your business, could you talk about how a 0:21:18.320 --> 0:21:20.800 company like yours leverages technology? 0:21:21.119 --> 0:21:23.960 Yeah, I think from a landlord's point of view, there's 0:21:24.000 --> 0:21:28.990 obviously operational efficiencies we can extract. Out of running our business, 0:21:29.070 --> 0:21:34.170 whether it's using AI or process automation with technology, we're 0:21:34.290 --> 0:21:40.600 using technology at the buildings, whether it's cameras, security, and 0:21:40.700 --> 0:21:46.560 other forms of energy efficiency or sustainability efficiency opportunities there. 0:21:47.850 --> 0:21:51.650 And then we believe in our business, data and insights 0:21:51.710 --> 0:21:55.750 remain incredibly impactful to how we can find the path 0:21:55.790 --> 0:21:58.830 of growth, invest around that path of growth. We have 0:21:58.869 --> 0:22:01.570 one of the largest data sets, I think, in our sector. 0:22:01.590 --> 0:22:04.810 So we really sort of went heavy into data and 0:22:04.869 --> 0:22:08.080 insights that we can use to make better decisions at Link, 0:22:08.100 --> 0:22:10.980 but then also help our customers make better decisions on 0:22:11.840 --> 0:22:15.570 supply chain networks and nodes, sort of There's some of 0:22:15.609 --> 0:22:19.170 the examples of that. Our customers are obviously heavily investing 0:22:19.210 --> 0:22:24.969 in technology, hard technology in the buildings, automation, autonomous trucks, 0:22:25.230 --> 0:22:28.020 and then also electric vehicles throughout their fleet networks. 0:22:28.880 --> 0:22:33.859 You mentioned security. In transports, obviously fraud and security is 0:22:33.920 --> 0:22:38.580 becoming a bigger and bigger issue. As a landlord, are 0:22:38.600 --> 0:22:42.119 you expected to provide a bare minimum security kind of 0:22:42.430 --> 0:22:44.940 security or is the security you have a fence with 0:22:44.980 --> 0:22:48.520 a gate and then the person that leases the space 0:22:48.580 --> 0:22:49.920 is responsible for everything else? 0:22:50.320 --> 0:22:54.000 Generally, the customer is responsible for security. We do provide 0:22:54.119 --> 0:22:56.449 secure buildings. I mean, that would make it attractive to 0:22:56.470 --> 0:22:59.169 a customer, whether it's a gated truck call, whether it's 0:22:59.230 --> 0:23:03.590 cameras at the facility. But generally, the customers come with 0:23:03.630 --> 0:23:08.050