Supply chain woes are resulting in supply chain "wows" for some publicly traded companies, including those real estate investment trusts (REITs) that specialize in warehouses all along the global distribution nervous system.

That includes the biggest of industrial REITs: Prologis (PLD 1.66%), which says that demand is at an all-time high for warehouse space. The company said in an October report that strong retail sales have driven vacancy among U.S. warehouses to a new low of 3.9%, as net absorption -- space newly occupied minus space newly vacant -- hit a record high of 115-million square feet in this year's third quarter, more than double last year's level.

Individual and institutional investors have responded to this sort of talk by pouring money into stocks, projects, and acquisitions. That reflects in the performance of the 13 REITs that Nareit -- the REIT national trade group and data tracker -- places in the industrial niche. As of Sept. 30, the group  had posted a year-to-date total return of 21.96%, even after a shaky September. Prologis, meanwhile, had notched a return of 53.80% through Nov. 29 of this year, and there's reason to believe this run is not over.

Four people walking in a warehouse.

Image source: Getty Images.

A giant portfolio yields a growing dividend payout

The San Francisco-based company boasts a portfolio of 4,675 buildings encompassing 994-million square feet and occupied by 5,500 customers. Prologis operates in 19 countries across the Americas and in Europe and Asia but generates 81% of its net operating income (NOI) and has 70% of its total assets under management in the U.S.

Just this year, Prologis has invested nearly $4.3 billion in development starts, comprising 166 projects across 62 markets in 15 countries. That adds to a 20-year development track record that features $36.5 billion in investments that, the company says, has seen it create more square footage of such space than all other U.S. logistics REITs combined.

Despite all this spending, profitability has not been an issue. Same-store NOI growth has averaged 4.1% for the past five years versus 3.1% for other national logistics REITs. For the third quarter, net earnings per share skyrocketed to $0.97 from $0.40 a year earlier, and core funds from operations (FFO), a key metric for REIT performance, rose nicely to $1.04 per share from $0.90 in last year's third quarter.

Meanwhile, Prologis stock closed at $153.28 on Nov. 29, just 1.03% off its 52-week high of $154.87 from Nov. 24 and 64.68% higher than the low of $93.08 it hit on Jan. 12. Its market cap of $113.3 billion is among the largest of all REITs.

The stock was yielding 1.68% at that level, compared with 1.29% for the S&P 500. That's based on an annual dividend of $2.52, a payout that has been consistently raised for the past 12 years, from $0.28 in 2009 to $0.63 in each of the past three quarters after a nickel boost in the first quarter of 2021.

Prologis and the logistics market both inspire investor confidence

That Prologis report referenced above says that at least 800-million square feet of additional logistics real estate will be needed to overcome the warehouse shortage and create resilience in the global chain. And crucially, the company says, the market doesn't even completely reflect that demand yet because many companies are more focused now on building inventory rather than adding space.

Company Chairman and Chief Executive Officer Hamid Moghadam said in the third-quarter earnings announcement that record-low vacancies are driving unprecedented increases in market rents and valuations, and space in its markets is effectively sold out.

Real estate equity investors who pick up what Prologis is laying down can seize the opportunity to capitalize on this robust future growth by investing in this particular REIT, or any of the others that specialize in their own flavor of logistics.