Prologis, Inc. (PLD) Earnings Call Transcript & Summary

Thank you very much. And everyone, welcome to this very -- should be very insightful conversation with the CEO of Prologis, Hamid Moghadam. The important point here is that Hamid is recognized as a world leader in the real estate market, especially in warehouse and logistics. He started Prologis in 1983, actually acquired the company slightly afterwards. But the success has been resounding. A few years ago, we had Hamid present at our consumer conference because we believe then as we do now that Prologis should not just be viewed as a real estate company, but as a consumer company, given the company's position in the last-mile distribution of goods to the consumer. In essence, they are at the heart of the consumer revolution of the past few years and what we expect in the future. Not only has Hamid navigated his company through incredible growth and turbulent economic times. He's also, what I call, a futurist and always has a keen sense of identifying key trends that will impact the economic and industrial landscape in the years ahead. Today, our conversation will be 2 parts. We will first discuss about Prologis directly and then move on to a broader macro trend. Again, for any investor to gain an understanding of the dynamics within the consumer sector, Prologis is a critical company to get to know. For full disclosure, we do own Prologis in our growth portfolio that I manage. With that, welcome, Hamid, and let's begin.

Thank you, Derek.

Great. And great seeing you again. For those in the audience who may be less familiar with Prologis, can you remind us of the scope of your industrial warehouse business and if you can give us examples of some of your biggest clients?

Sure, I'd be happy to. And good morning, everyone. Prologis has 1 billion square feet of real estate, the round numbers, in 19 countries around the world on 4 continents and over 5,000 customers. And we have an interesting business in that our top 25 customers together account for only 20% of our business. So it's a very diversified business. Our largest customer is Amazon. I believe we're their largest landlord as well. They account for about 4.5% of our total. And then the next largest are about 1%, 1.5%. So very distributed. And -- but really, all the customers you would imagine. And I think probably the most interesting thing for this audience for our business is that 2.5% of global GDP flows through our buildings. So it's pretty likely that pretty much everything in your room that you're sitting in or on the desk you're working on, at some point, some component of it has come through one of our buildings somewhere in the world.

Great. So your view of looking at the economy is massive. And from that point, when you look at the pandemic, which of your clients thrived and which ones didn't?

Yes. I would say 2/3 of them -- and we have the details of this by category. But big picture, 2/3 of them really had their businesses improve significantly. A very small portion, about 1.5% that were in hospitality and convention support and all that kind of stuff, really, the business fell off the face of the earth. And then about 1/3 had a little bit of a decline. Overall, growth was better than pre-pandemic levels. And the reason for that was that many customers, even those who are in the pure retail business, accelerated their plans for building out their logistic networks to really jump on the e-commerce trend, particularly grocers and people like that who weren't completely digitized, really accelerated those plans. So overall, we were fortunate. Our business did pretty well.

And so when you look at that increased demand, what did that do to the underlying asset values? And what do you anticipate that in the future?

Yes. Asset values have increased I would say, significantly in the past. Actually, in the past 10 years, but particularly in the last year, after a small drop right after the pandemic, where people were trying to figure out what things are worth. Essentially, they realized that our earnings growth was intact. In fact, we didn't revise our business plan at the end, and we met our business plan that we had formed before COVID, actually exceeded it in certain important aspects as well. So earnings were better. And obviously, because of interest rates, multiples keep getting better. And the other thing that's going on is that a lot of focused real estate investors knew that they couldn't really invest in some of these other sectors because they couldn't really figure out how to price them. So a lot of them actually came into the industrial sector. And it continues to be a very popular sector, not just for public investors, but especially for private investors that have it as part of their alternative strategy.

Great. And then because of this growth and because of this move to online, how is that impacting your development pipeline this year and looking forward?

Yes. Our development pipeline is at the high cycle level. We're developing more than $3 billion of real estate across the world. And mostly the 75% of that development is spec. In other words, we develop without knowing who the tenant is and lease it either during construction or shortly thereafter. And 25% of it is what we call build-to-suit, where we have the customer upfront before we build for them. That number has now increased to about 45% because there are just no space around for people to lease. So in order for them to meet their growth plans, they need to go commit to buildings before they're built.

And before -- a couple of years ago, we spoke about this, one of the barriers to entry has always been land, especially near the critical cities. Is that still the case? And are there ways of overcoming capacity issues like restricted space?

Yes, land is -- continues to be a real constraint. In fact, much more so than when we last spoke. But it's not really land. I mean there's plenty of land. It's the entitlements. So it's the ability to develop that land that's difficult, particularly in markets that are dense, and they are the places you want to be. So if you want to be in markets that are in the middle nowhere, you can do that, but that's not where people want their distribution facilities. But in markets like New York, San Francisco, the major urban areas, London, Tokyo, it is scarce. And the only way you can increase capacity is if the values get high enough, like they are in Asia. You can densify the site by going multi-story. In the U.S., land values historically have not been high enough to justify that. But actually, we built the first one in Seattle a couple of years ago because when values had gotten to the level that it makes sense to do that. So I expect it to be an increasing trend and a more important trend. And it's very important around the world to densify sites.

So maybe just a quick question about the densification of sites and shall we say going vertically, how -- if you look at the opportunity on doing that, how much more capacity could you generate just by redeveloping a site by going vertical?

Very little because rents have to move 30%, 40%, 50% before you can afford to do that. So it's not a physical issue of building a multistory warehouse. That's the easiest part of it. We know how to do that. It's talking to municipalities into allowing you to do that. Because obviously, logistic facilities generate traffic and truck traffic and diesel and all that kind of stuff. So nobody really wants a warehouse in their backyard. And the other thing that interferes with our ability to develop the land is that industrial real estate is the cheapest land on the block. So over time, as these cities develop, people take industrial facilities, tear them down and build apartments or they build -- they used to build retail or they build office buildings or biotech on them. So a lot for established San Francisco Bay Area in the last 20 years, something like 20 million square feet of space has been taken out of the industrial market while demand has skyrocketed. So that's why pricing has been very strong.

Got it. So it's slightly off topic, but a lot of general interest. One of the things you see is a lot of goods and supplies going through your warehouses. How involved is Prologis on the vaccine rollout? And if so, how do you think we're doing? And what do you think the chances are that everyone gets fully vaccinated here by the end of 2Q?

I think we're doing really well, finally, I would say, in the last couple of weeks. It's really been a hockey stick. So I'm much more bullish about that. And yes, I do think we'll get people back to the -- people want to be vaccinated by the end of the second quarter. And I think we'll have some excess vaccines because the government has been very ahead of the curve in terms of procuring supplies. And I suspect we're going to offer that to other countries and all that. But that's a different topic. To answer your first question, yes, we were very involved in it. Pfizer, for example, in Chicago, is manufacturing vaccines in one of our buildings. That's one of the sites where they're manufacturing this. We have McKesson and Cardinal as important customers, and they're just very active in the distribution of vaccines. And then FedEx, UPS are critical customers. So a lot of what goes through their warehouses are vaccines. So if you look at all the different ways that we're involved, it's pretty substantial. Also, when the pandemic hit, we were very involved in distributing PPE and securing PPE and all that. And actually, we were doing some of that for our customers who couldn't secure it on their own.

Great. So -- and it really has been an impressive effort of many different companies coming together and figuring out the huge logistical effort. And I guess, Prologis has played a really central role in that.

I think business is -- putting Prologis aside. I'm obviously biased. But I think business has done a really good job throughout the pandemic, by and large.

Yes. Great. So going back to the economics of the business. Going forward, a few years ago, you made the projection that the growth rate of migration to online was going to be much faster than people anticipated even before the pandemic. But now when you look forward, some people are arguing that maybe the pandemic forward growth and now it's going to rob growth from the future. What is your view on that? And what do you see as your like underlying FFO growth over the next few years?

So I think people -- we underestimated the growth, even though we were out of the curve. And even before the pandemic, we underestimated growth. So growth ended up being better. I don't believe that -- I think there's going to be a lull in the growth rate in the penetration of e-commerce once things open up because people have been cooped up for a year. They're going to want to spend their $1.5 trillion in the U.S. on probably experiences in getting out on vacation and doing all that kind of stuff. So they're going to do that for sure, and there will be a flattening of debt penetration rate. We got basically 5 or 6 years of penetration, as you point out, in the first 3 or 4 months of the pandemic, and it just kept going. But the reason I don't think it's going to stop is this -- and by the way, it's not just me, it's all the companies that are directly involved in this and have much more data than we do. But the reason it won't is that we've now introduced a whole part of the population, particularly the older demographics, to a shopping experience that they never had before. Out of necessity, they would have never done the conversion. I mean my in-laws have [indiscernible] they were never unpacked from their boxes. But when you get into this environment, you got to kind of do it and learn it. And I don't think a lot of those people are going to go back to their old ways. That doesn't mean retailers going away or anything like that. It just means that for certain things, I think the penetration rate will continue to increase. We went from 14% of total retail sales in the U.S. to about 20%. And who knows what the potential is. But I certainly think for the next 20 years, it's just going to keep growing, and we're in the second inning of this very long game. One other place we can look is places in the world where the penetration -- where the standard retail infrastructure is not as developed, like China, Latin America and all that. And those countries are much faster growth rates in terms of penetration of e-commerce because they don't have this alternative. So I'm very bullish about the penetration of e-commerce. But our business, e-commerce is an important driver for sure. But our business was a good business before e-commerce ever showed up, and it's just a better business today.

Got it. So...

I'm sorry, I didn't answer your question about rental and earnings growth. Our rental growth has been extremely strong. We've been in high single digits in many years since we last talked. I think we projected in your conference or at least sort of talked about 8% to 9% FFO growth. We've done 11% a year over that period of time. So we far exceeded what we thought we would do, which was actually optimistic in many people's views. And I'm even more bullish about our business today than I was -- when I last spoke to you.

Great. And then in terms of -- one of the things we spoke about last time was something which powers many businesses because of efficiency, and that's the use of data. And you have a big data business because you collect all this data. Where are you in the process of using that data to help clients and even monetize it?

Early, early, early. So we've now used data in terms of our revenue management activities, which is optimizing where we set rents and occupancy and doing -- bringing some of the practices that historically, hotels and airlines and a lot of other companies that brought to their practice. It's a little harder in our business that -- because we don't have a standard middle seat and a standard window seat in the economy. The products are less homogenous. But those techniques have really helped us optimize our rental flows. We've brought data in terms of helping our customers actually manage the interaction of their parking areas, their trucking and staging areas and sort of solved the dwell time problem. Most of you are probably not familiar, but a lot of the energy on these trucks gets burned while they're waiting in the parking line of our warehouse waiting to access a truck door. And if you can help them with that in terms of staging the flow, that is a very, very material savings for customers. So through our Prologis Ventures, which is our technology investing arm and our corporate development arm, we work with a lot of technology companies to develop the tools that you need to be able to monetize that data and effect by making the customers more efficient. Lots of examples of that.

Great. So you bring up the environmental think about making deliveries more efficiencies and they're not idling so long, which is -- impacts on the environment, which brings me to my next question about ESG. And obviously, an increasing concern about investors. How does Prologis attack -- approach ESG from a company point of view? I would love to hear that.

So we've been very active on the ESG front, long before it was called ESG. So let me give you a couple of specific examples. We're always in the top 3 of renewable power generation, solar on top of our roofs. We are the largest owner of roofs around the world, a distinction that I didn't really go to college to get, but we are. So obviously, we have huge opportunities to produce solar energy. And we do develop a lot of real estate. We've always been doing it to lead standards. So big player on the sustainability side. In fact, in Davos, when they rank different companies. One year, we got as high as the sixth global company in sustainability in any industry and #1 U.S. company. They're European, so they scored themselves a little bit higher, but that's okay. So -- but we were the #1 U.S. company, which was really great. So on the sustainability side, very active. On the governance side, companies rank governing these practices. And I think over the last 20 years, I don't think we've ever been second on the list. We've always been #1 on the real estate side of things. So maybe -- once we've been second, I don't know. But we are up there, always mostly as the #1. And so -- and we do a lot of stuff in terms of employee engagement, we are very active in the communities in which we operate. We have, for example, something called the Prologis Community Workforce initiative, where we train young people coming out of high school for these jobs in fulfillment. And that's been very well received by the municipalities that we collaborate with. We spend our money, we develop the curriculum. It's the number one, number two and number three problems for our customers is finding employees. So anyway, I can go ahead talking about this for a long time.

Right. So you really live and breathe it. So this is an interesting question is that you are a public company now maybe, I'd love to hear your views, competing against, let's say, private equities to buy real estate? What do you think investors should think about when you're investing in a company like yours where in plain sight in what you're investing in versus maybe private equity where you're investing with the private equity, but you don't maybe not know what you're buying. What do you think the different investors should think about? Going private or -- going private route to invest in real estate or investing in Prologis directly?

So to be honest with you, Derek, we got tired of fighting that debate. So we have a very active private equity business that's even better than the REIT. So all the benefits of being in that business go to the REIT. So roughly, we have $150 billion of assets, round numbers, about $100 billion of it is on the balance sheet, and about $50 billion of it is in funds that intend funds that we sponsor. The company is always a major investor in those funds, oftentimes, the largest investor in those funds. And the other investors, third-party investors are some of the most respected institutions around the world. So number one, it's a chocolate vanilla thing and I long ago learned that I'm not to get in the middle of that debate. I have my views, but I keep them to myself. Number two, I think the private equity guys are a lot smarter than we are. So that's for sure. But they're doing 25 different businesses, and they have a short-term hold cycle by the nature of their funds. So they can't quite invest in customer relationships the way we can. We view those as permanent relationships. So we are trying to take our business from a deal business, a transaction business to a customer-centric business. And what that means is that we look at the total life cycle value of that client relationship. And we try to attack their pain points one by one. Our business is crazy. You rent somebody real estate, and then they got to go find their own internet, and they've got to go find their own racking system and forklifts. And really, we make life very complicated for customers. So we are now taking this approach of real estate is at the core. But around that, by virtue of those customer relationships, we're attacking adjacent areas and one by one, solving customer problems. I think the private equity guys are too smart to want to spend their time on such mundane things.

So we won't go about them. But when you look at your -- because we don't know what their client retention is. When you look at your client retention because of that full-service model, where does that stand?

It goes between 70% and 80% retention in -- depending on where we are in the cycle. And in many cases, the nonretained -- which we analyze very carefully, we do exit analysis and all that. Many of them is because they're growing and we don't have their exact right space and the right place to accommodate them, and they're in some kind of a hurry or they're shrinking or they're closing down a location and going to another location. So people don't leave us because of customer service. And they leave us because their needs change. And we monitor that stuff really, really tightly.

Great. So before we get into the macro question, one last -- one question specifically is that what was the most difficult thing you had to deal with because of the pandemic? And what do you think is something that you've learned, which will stay with you for the duration and a valuable lesson?

And I'm pleased don't think that I'm being pollyannish, but the pandemic the way it played out for our business was not nearly as stressful as, let's say, the global financial crisis where people thought there wouldn't be another dollar available for real estate and value has really changed and all that. But I think the area that we, I think, excelled in, to take the second part of your question, was in employee engagement and communication, communication, communication. You have to over communicate. People are scared. People don't know where the world is going. So you've got to be there in front of your people. And you've got to encourage your people, particularly the customer-facing ones to continue to take care of customers, but in a safe and different way that we have to sort of improvise and figure that as we went. But I think those kinds of market situations -- for example, the latest weather events in Texas really enable good companies to differentiate themselves from the pack because it's really during the stressed area times that you earn your -- the trust of your customers. When times are good, everybody is kind of doing an okay job. So we're really focused on those kinds of opportunities. But we're focused on communities, very generous with communities in terms of space, in terms of money, big focus on employees and big focus on customers, very little focus on Wall Street.

Right. Okay. That's good. All right. So let's go to the macro questions now. So we -- when we look at the future of retail space, specifically. There's this debate about the death of the mall and the bricks and the mortar. What is your view on this? Do you think that, that's over exaggerated? And really going forward, we're going to be looking at a hybrid model?

For sure, we're going to be looking at a hybrid model, I don't think retail is going away. But I think the problem with retail is not actually e-commerce. The problem with retail is retail. I mean, we have the -- by far, by a factor of 4 or 5 the largest amount of retail, number of square feet of retail per capita of anywhere in the world. It's 5x the number in the U.K. because we built 26 different kinds of shopping centers over the last 50 years. So they're just too much space, retail space and even before the pandemic, there was good retail and not so good retail. Good retail will do fine. It will look very different than it does today. It will be -- it will require a lot of CapEx to get there. But ultimately, good shopping centers are placed in good demographic areas with a lot of density and a lot of wealth around them and disposable income. And people can figure out a way of monetizing them. It's going to be expensive making the transition, but I think those will do fine. I think a lot of retail just needs to get great. I mean, because, frankly, it's obsolete. Now some retail is also not absent in the e-commerce business. A lot of our customers are successful retailers that do good e-commerce business by buying online and, for example, picking up at curbside. So I think good companies will continue to do well. And good malls will continue to do well, although they look different. And I think it's just going to wash out a lot of other types of properties that probably shouldn't have been built in the first place.

And do you think that there's a way of changing, let's say, the not so good malls, the obsolete centers into new distribution centers? Is that an opportunity for you?

It is, and we are pursuing it aggressively. And there's been a lot of press about this. But frankly, it's a lot harder than most people think because you have to deal with the regulatory issues of re-entitling those sites. And again, people don't like trucks in their neighborhood. So it's very tough to get the entitlement. It's tough to just redevelop a portion of the site because you've got to wait for all the leases to expire at the same time, so you can clear the site and do that or there are co-tenancy agreements in these shopping centers. So one tenant that's still operating is not going to let you actually kick up some of the other tenants. So a lot more complicated than it sounds on paper. There are maybe a handful of opportunities that we are pursuing right now. And we've written a paper about this to try to quantify exactly what it means in terms of incremental supply of logistics, a subject we're very interested in. And we believe it's around 5% of total supply -- is going to come from repurposed buildings of one form or another. By the way that paper is on our website if anybody wants to read them.

So one of the issues, which you mentioned a couple of times about people not liking warehouses, is trucks, noise and carbon emissions. Do you think as the fleet -- truck fleet get electrified, do you think that's going to be a big problem solver for you and enable you to convert these, should we say, redundant spaces because it's going to be more green friendly?

Not really because that is just one problem. Still, how would you feel about if you have a really nice shopping center next to your house or a mile down the road? How would you like it to be converted to a bunch of warehouses and really quiet and nice electric trucks driving around. There's still in a lot of neighborhood opposition to those kinds of things. So I think it's going to be tough. It -- at least it will take that reason away, but I think there are plenty of other reasons why it's tough.

Okay. So let's talk about work from home, a subject close to all our hearts. I have in my office today, by the way. And just very one quick -- well, you're not because you may Internet connection was bad. It was really weird. I came to my office and I saw the last e-mail, and it was March 11, 2020. How odd is that? But in terms of the work from home, how do you think this is going to change consumer and industrial demand in the future? And do you think that consumer behavior has changed because they've had more time because they've been at home to do online shopping. Is this going to reverse when people get back to their normal lives? Or do you think it's going to be a hybrid model from now on?

I think it's totally going to be a hybrid model. And for sure, it will partially reverse and maybe over reverse compared to the long-term, but I think people have realized that they don't need to be at the office every day. They can save in commute time, they can be more productive, but there is Zoom exhaustion. So that social interaction is also important. So if I were going to guess I would say, very few people are going to stay home 5 days a week, very few people. Maybe a little bit more are going to show up on 5 days a week and wear a tie and do all those crazy things that we used to do. And I think most people are going to be somewhere in between. And if I were going to pick one number, I would say, 20%, 30%, probably less time at the office.

And have you guys said -- have you at Prologis had a corporate policy about flexible working yet? Or is that still something in progress?

No. We've talked about that for certain kinds of jobs that can't be done from home. We have a policy that you got to show up. But the vast majority of jobs that are noncustomer facing, you can decide whether you want to come to the office or not as long as you get your work done. I don't really care where you do it.

Right. So let's talk about the labor force. Before the pandemic, it was getting really tight how does it stand now? Where do you think that's going to in the near and medium term? And how will automation impact that?

I think labor is a really tough problem for our customers. And I expected it to become, with the unemployment rate that we experienced at the beginning of the pandemic, I thought that problem would ease, it has not. So our customers continue to struggle with that. Automation is very capital intensive. So a lot of people who are in the distribution business don't have that kind of capital. Everybody thinks of Amazon, obviously. They have plenty of capital, they can do that. But a lot of the other kind of customers day-to-day don't have that kind of capital to automate. But having said that, people are being forced to automation because they just can't find the labor, it's not that they're trying to eliminate the labor. If they could find it labor, there would be less automation. So I'm not sure the politicians, by the way, understand that. And by blaming all this on the Chinese and whatever Mexico or whatever. It's automation that has really changed the employment landscape. And a lot of it is forced because of crazy labor practices.

Right. In terms of the economic cycle, where do you see us now in the United States and where do you see -- what kind of growth do you see going forward versus what we've experienced in the last decade? And then maybe give us a quick rundown of Europe and Asia?

Sure. I think the U.S. growth rate is pretty simple math. A little less than 1% population growth and a little more than 1% productivity growth. So I think the long-term sustainable full employment growth rate for the U.S. is about 2% a year. That's just life. But I think in the next couple of years, we're going to have way over that. First of all, we have all this monitory and fiscal stimulus that's coming in. And I think the economy is a loaded spring. I think once things open up, we're going to have some period of time. I'm not smart enough to know what it is, but the economy is going to be off the charts good. And then I think it's going to revert back to that sort of 2% plus or minus kind of growth rate. I'm not sure something that radically changes productivity like AI or whatever. So that's my view. But it's going to be very, very strong in the next 12 months anyway. Europe is a lot slower than the U.S., but basically with the same profile. The place that's surprisingly strong is the U.K. And particularly in our business, it's extremely, extremely strong. I would say for -- as far as our business is concerned, the only place that we see softness in Europe is probably Madrid, not even Barcelona, but Madrid. Asia is super strong. China is very, very strong. And you guys are going to think I'm crazy, but Japan has had the best 2 years of logistics demand growth, but it's not because of the underlying growth of the economy. It's because of the transition from one type of economy to an online economy. So that's been a big driver of growth in Japan. So our business is really literally on fire in Japan in a good way. And Latin America has been very resilient. Again, you're going to think I'm crazy, Mexico, Brazil, I read the same paper as you do. But I think the big wave of e-commerce that's coming, and they've been behind the 8 ball on that because of basically low Internet usage. I think that's going through a big catch up. So our business has done very well in Latin America as well.

Great. And then in terms of inflation. There's a lot of talk about inflation now reverting. Maybe we've entered a period of not declining inflation, but maybe settling out to starting to increase again. Are you seeing that? Do you -- what is your view on that? And with that, what about interest rates? What are you anticipating about interest rates?

Well, I'm the wrong person to ask that because I've been very wrong about that for the last 5 years. I've been thinking interest rates are going to go up and up and up. And eventually, they will, and I'll be right. But I've been really wrong about that in a big way. I think in everything that I look at, financial assets, et cetera, et cetera, there's a lot of inflation. There's a lot of asset inflation. And there would be -- with all this monetary stimulus in there and now the fiscal on top of that, I think we're going to have some short-term increases in price levels. And we have shortages and stuff like that, that add to that. But that -- when I went to economic school, Paul Samuelson told me that, that's not inflation. That's a onetime change in the price level. So whether there is an endemic-embedded inflation or not, I think it's tougher to have it these days than in the 70s, for example, where some of us were still around and experienced inflation in a big way. But because the markets are very interconnected. Labor markets are interconnected. By the way, notwithstanding all this, we're not going to do business with China. Just look at the numbers, the trade deficits are -- numbers are going up every month. It's crazy. There's like months of ships backed up in the port in L.A., where is that stuff coming from? It's coming from China. So there's labor arbitrage around the world, and a lot of stuff goes either in container ships, which is labor arbitrage or goes over in the Internet, which is on the service side of the economy. So I think it's tougher to get inflation when you have so many people around the world that can now do a lot of the work that we do. So I'm probably more sanguine on inflation in the long term then the current flavor de jure of the market that we're going to get inflation, inflation and inflation. So I think the Fed is really trying hard to get us to have some inflation. And they're going to succeed at some point to get us to the 2% long-term target for sure.

Right. Well as somebody wants recently told me that 2% target, I think they met with the -- with technology on the horizon and ever-changing, what technologies do you think will have the greatest impact on the consumer going forward?

I think data and analytics and AI, generally, all of that whole area is going to have a tremendous impact because we're going to get much more efficient and getting stuff around, predicting what people want, getting it in the right place and all that. We're going to take a lot of that pain out of the consumers consuming experience. So I think that's going to be big. One area that I think has tremendous potential is AR and VR, particularly it comes -- when it comes to digital communication, what we're doing and virtual communication and certain categories of retail, for example, apparel. I think the problem of returns and fit and all those kinds of things are going to, over time, be addressed by virtual reality and augmented reality. So I think for certain categories of consumption, that's going to be a really big deals. So communication and consumption are going to be affected by the VR and AR.

So do you think -- and another thing which has helped some retailers like the off brand retailers is the fact that there's always a glut of inventory at the end of the day. And comes across as not that efficient. But do you think with the use of data that we're going to get to a point of time, which really minimizes this amount of excess inventory and waste? And how long -- and what kind of measures would you say we could measure the improvement in that?

There are some very exciting technology companies that are being formed and are being funded today, that solve exactly that problem because it's not just an excess of goods that need to be discounted. But it's sometimes getting that place -- you go to the store, and there's plenty of jeans around, but they're not in the size you want. There's so...

They were small.

Yes, I wasn't going to...

My apologies.

In my case, it's true. But so I think what happens is there is a real business opportunity of getting good to the right places and positioning them. So making it much more efficient. And I think data is the key to that. So I think -- yes. And I think some of those businesses are going to make a lot of money helping retailers with that problem.

I mean, can you give us some names in some of those -- are they public companies or are they private companies?

No, they're private or early stage, and I probably shouldn't tell you about them. They want to call you up probably some are on this call.

Right. But they're working on it, and you think it's very promising.

I think it's very, very -- I think it's a big pain point that is in search of a solution and a lot of smart people are working on it.

Great. And we've got one more question, which actually just came in. So are there any underlying trends that you think people are ignoring at their peril that they shouldn't be?

I think people are going to get a head fake. And I think what's going to happen is when we open up, e-com will pause, will flatten out. And people are going to say, okay, we just brought forward demand. They'll make investment decisions, and they'll find out that they're going to be wrong.

Right. And that -- how long will that take to -- how long is that flattening out will take and then back to growth?

I think about a year. A year after any place opens up and the world is going to open up at different rates, at different times.

Right. Great. Well, this is great. We've learned a lot as always. As I said at the top of the hour or whenever we started, I do think that Prologis is such a central part of the consumer experience going forward that for any of the clients out there who are in the consumer space and traditionally haven't looked at real estate, Prologis is one of those companies you really should get to know. So Hamid, thank you, as always. Great talking to you, and have a great rest of the day.

It's a pleasure, Derek. Always good to talk to you.

Thank you. Yes, buh-bye.