Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting to read:%0A%0A {0} %0A%0A {1}

A Landlord’s Guide to Working with 3PLs

In the age of eCommerce, third-party logistics providers, or 3PLs, are growing faster than ever.

Landlords Guide to Working With 3PLs

Co-Authored by Doug Ceva, Prologis

In fact, in 2017, 3PLs leased an estimated 40% of the vacant warehouse space in the U.S., making them a prime target for landlords and developers. And their rapid growth has only continued since—showing no signs of a slowdown anytime soon.

So, what should landlords consider as they look to reap the benefits of the 3PL boom? First, it’s important to understand the customer when pursuing a lease agreement with them. Each 3PL tenant has unique business needs, and no two 3PLs are exactly alike. From transportation and freight forwarding to warehousing, eFulfillment, and distribution, 3PLs offer a wide range of contracted services, and for landlords, this variation makes working with a 3PL much different than working with a more traditional occupier, like a manufacturer.

However, 3PLs often make excellent, profitable tenants, and by understanding their industry, landlords can take advantage of their booming business.

Financial Strength

The 3PL business has historically been a competitive industry with thin margins – sometimes as narrow as the single digits. In the past, when landlords looked at a 3PL’s financials, they were understandably concerned. However, the financial concerns of the past don’t seem to be as much of an issue anymore. Today, many 3PLs are major corporations (some publicly traded), earning strong net operating incomes.

The Best Approach: Know what to expect – 3PLs typically have thin profit margins because of the competitive nature of the industry.

Decision-Making Speed

The way 3PLs operate also makes it difficult for them to quickly make commitments to leases or development negotiations because there may be extenuating circumstances that delay decision-making. Those circumstances often involve an ongoing RFP process or the negotiation of services and operating agreements. Therefore, it’s reasonable to expect the lease negotiation phase to take a bit longer than it might with a different type of tenant.

The Best Approach: Be patient. Recognize what is driving the customer and what stage they are at in the RFP process with a customer.

Lease Terms

3PLs have more specific lease terms than typical occupiers because their lease agreements are determined by operating agreements made with their customers. Therefore, it is typical for a 3PL to want a lease to be coterminous with an operating agreement, as it’s too risky to sign a longer-term lease or take more space than contracted.

However, there are exceptions, as some larger, well-established 3PLs look to create an anchor network in key cities in the U.S. and around the globe. These anchor locations, or “hubs,” are determined by geographies that will likely have a high demand for 3PL services.

The Best Approach: Understand the real estate requirements the 3PL is trying to achieve, as outlined in the 3PL service agreement, and drill down to the key drivers that will help the 3PL succeed with its business objectives.

The Takeaway

Just like any other industry vertical, 3PLs come in all shapes and sizes. Some are professional warehouse operators with terrific balance sheets and the willingness to sign long-term leases. Others are transportation companies that need truck yards and shorter lease terms. Regardless, many 3PLs bear a key similarity: they make great tenants and working with them can be advantageous to a landlord’s profit margin.

As the 3PL industry continues to mature significantly in the coming years, landlords should take note. By understanding a 3PL’s business model, its reputation in the industry, its financials, and the clients the 3PL is serving, landlords can maintain successful tenant relationships and reap the benefits of the 3PL boom.


This article was featured by Connect Media on October 15, 2019.

Doug Ceva Prologis


Doug Ceva is the VP of Global Customer Solutions for Prologis. He focuses on supplying solutions chiefly for customers in the third-party logistics and retail industries. A seasoned professional with over 40 years of experience Doug spent the bulk of his career developing his expertise in the worldwide logistics and transportation industry.

Related Insights

2019 US Industrial Construction Map
Research • Industrial

Industrial Construction Map

Use Cushman & Wakefield's interactive map to find out how much industrial commercial real estate construction activity is taking place in select United States cities.
Niche Asset Card Image
Research • Insights

Niche Assets

Transaction activity for niche assets—healthcare, cold storage, data centers and senior and student housing—has exploded in recent years.
David Bitner • 10/21/2019
Cool Streets Card Image
Research • Retail

2019 Cool Streets

The 18-Hour Cool Street is driven by persistent urban renewal. Though “upstart” neighborhoods in some markets were unexpected, the trend will continue.

Ready to talk?

Our professionals are ready to provide further details on this and many other topics.

With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on  Cookies

More Options
Agree and Close
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All