SAN FRANCISCO—To see where global logistics real estate trends are headed, look first at the sector's evolution in the US. That's among the key takeaways from a white paper put together by Prologis Research charting the agglomeration of distribution centers—or, as the white paper is titled, “The Evolution of Logistics Real Estate Clusters.”

One reason for developers and investors with an eye on Europe and Asia to study the US is that the clustering of DCs is far more advanced in developed North America. One of Prologis Research's proprietary indices, the Modern Logistics Concentration, shows a median logistics ratio of 77 square feet/household across North America, rising to 174 for Central and Eastern Pensylvania. The MLC median for Western Europe is 28 square feet/household, while in Japan, it's three.

The other index discussed in the white paper, the Modern Logistics Quotient, is defined as the MLC for a local cluster divided by the median MLC for the broader regional supply chain. For example, modern stock per consumer household in Southern California is 123 square feet/household.  Since the median modern stock per consumer household for 42 major logistics markets in North America is 77 square feet, that means the stock is 60% more concentrated in SoCal than the broader regional average, and thus equates to a 1.60 MLQ.

“In our view, a ratio greater than 1.0 indicates that a local cluster is most likely a net exporter of logistics services, and that demand for logistics real estate is driven by a distribution region that extends beyond the local consumer base,” according to Prologis Research. By the research team's measure, “a highly competitive trade-oriented cluster” is defined by an MLQ greater than 1.20

“Most European clusters have less than half of modern stock compared to comparable US clusters when normalizing for the local consumer base,” according to the white paper. “Europe's logistics real estate recovery has proceeded ahead of the economic recovery due to demand growth from customers upgrading from obsolete to modern stock. Looking ahead, additional development is likely as the share of customers seeking modern stock rises.” Prologis Research foresees a similar construction boom in Japan, where the amount of modern DC stock belies the population density of the Tokyo and Osaka metropolitan areas.

In the US, according to the white paper, logistics clusters fall into two categories: clusters in which demand is oriented toward population centers, and those in which demand is driven by access to global trade routes. Markets oriented toward population centers, such as South Florida, typically have an MLC close to the national median of 77 square feet/household.

“Demand for logistics space in clusters oriented toward global trade patterns includes the fastest-growing big box markets in the United States,” such as the Inland Empire in Southern California, the white paper states. The IE's rise was driven in large part by higher quantities of imported goods from Asia for distribution across the US. Atlanta, meanwhile, benefitted from population growth in the Southeast.

Since 2000, just five broad clusters in the US have accounted for nearly 60% of the largest logistics facilities—i.e. those of 500,000 square feet or greater—to be delivered. All have MLQs greater than 1.0, and all have access to high-quality highways, seaports and rail intermodals. They're Central and Eastern Pennsylvania (with an MLQ of 2.3), SoCal and Chicago (each with an MLQ of 1.6), Dallas (1.5) and Atlanta (1.4).

The US supply chain, according to Prologis Resrarch, is “relatively mature.” Retailers and distributors in this country “have planned for and operated as one market for 50 years, following on the heels of the Interstate highway system and the deregulation of trucking and rail in the 1960s and 1970s.” By comparison, Asia has recorded a surge in the adoption of modern logistics stock only recently. As a result, the MLC ratio for a mature logistics cluster—such as those found in the US—can serve as “a development guidepost for an emerging cluster with similar demand driver characteristics.”