So this is where balance sheet matters. This is where quality of location and product matters, and we are going to be very selective about the projects that I described. But that’s why we have been building our balance sheet and keeping our leverage around 20% all this time. This is when we put it to work.
Operator: And the next question comes from the line of Vince Tibone with Green Street. Please proceed with your question.
Vince Tibone: Hi. Good morning. I have a follow-up on an earlier comment about 20% of your markets you are managing for occupancy not pushing rent. So what are those markets where industrial landlords have less pricing power today?
Tim Arndt: Sure, Vince. We covered a couple of them. I talked about Southern California. I point to Houston, Indianapolis, and then outside the U.S., the softest market might be Poland.
Hamid Moghadam: And China.
Tim Arndt: And China and I think I’d offer now that market vacancies are beginning to gap out again, I think we are going to see quality make a bigger difference in terms of portfolio mix.
Operator: And the next question comes from the line of Vikram Malhotra with Mizuho. Please proceed with your question.
Vikram Malhotra: I just wanted to get your thoughts to just clarify one thing more broadly. Two trends, I guess, one, just the whole reshoring team that we are hearing more and more about. And then second, just Amazon as they have put a lot of capital into the coast and across the country. I am just wondering sort of when you marry those two things together, is there sort of greater investment moving towards the Midwest or more manufacturing pockets? Is that an opportunity for PLD going forward?
Hamid Moghadam: So, generally speaking, I would say, on where manufacturing is taking place, in Asia, there’s a lot of manufacturing still in Asia. It’s not all in China and it had been gradually declining in China in the last couple of years anyway. It was first moving to western China and then it was spreading to other places in Southeast Asia. But there are going to be strong flows still from those places. It’s just not going to be all from China. But the container doesn’t care whether it’s coming from somewhere else or China. It lands in the same ports. Secondly, demand in our product is mostly driven by consumption and not manufacturing. In manufacturing, the finished product ends up in a container and on a truck or a ship.
So the warehouse is a truck or a ship. So that manufacturing per se doesn’t generate a lot of demand. When those containers land in places where consumption takes place, that’s when the demand is generated for deconsolidation. Now those markets happen to be in populous parts of the country, because that’s where the consumption is and those markets tend to be high barrier to entry markets. So we don’t think the dynamic of on-shoring to the extent that it exists is going to change things around all that much. The biggest beneficiary of on-shoring has been actually near-shoring and it’s been in northern Mexico. Northern Mexico markets are 100% occupied and there’s insatiable demand for product in those markets and most of that is for distribution buildings that are used for manufacturing purposes.
So that’s where we have seen the material demand. If there’s more demand coming for manufacturing in the U.S., A, we haven’t really seen it and if we do see it, we will be the beneficiary of it because we are well positioned in those central markets as well.
Operator: And our last question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question.
Blaine Heck: Great. Thanks. Hamid, just a bigger picture question for you. Can you talk about how you are thinking about managing exposure to geopolitical risk and instability and maybe to what extent the latest turmoil in the Middle East could impact your operations, if at all?
