SAN FRANCISCO—E-commerce continues making inroads into US retail, with  figures from Custora showing Black Friday online orders up 15.6% year over year. Thanksgiving e-commerce volume was also up by double digits compared to the year prior. Yet despite the implications that the uptick in Web-based retailing has for logistics real estate demand, Prologis Inc. sees a more disciplined approach to development in the space compared to previous cycles.

"The great recession laid the groundwork for more conservatism on new commercial development in the US," says Chris Caton, SVP with Prologis Research. "Today, key players are more disciplined and are in a better position to respond to shifting market dynamics."

A new white paper from Prologis identifies five factors underpinning this emphasis on discipline. They include a movement toward larger-scale institutions as key players, greater aversion to risk, new lending constraints, a shortage of real estate professionals experienced in development and better information to inform development decisions.

One theme linking a few of these factors is the involvement of lenders. "The supply cycle this time around feels different," Jeff Horowitz, global head of real estate, gaming & lodging investment banking at Bank of America Merrill Lynch, says in the Prologis white paper. "Banks are generally more cautious given the experience of the last round of overbuilding. They face increased levels of regulation and have a greater focus on larger, more institutional developers."

Just as industrial development increasingly is in the hands of a smaller group of larger institutions, so the banks themselves have grown in scale and concentration. Prologis' white paper notes that the top four US banks account for more than 40% of all deposits, up from about 10% two decades ago.

As they've scaled up, banks have focused increasingly on relationship lending, favoring "large and disciplined real estate enterprises," according to the white paper. Burned by losses during the recession, they've also become less tolerant of risk in construction lending.

For lenders, there are outside forces at work, in the form of greater regulation around construction lending. "Basel III and HVCRE (high volatility commercial real estate) rules adjust risk weightings for construction loans," according to the white paper. Loans within the HVCRE designation that don't meet certain criteria receive a 150% risk weighting. Since the regulations are still new, "some fluidity exists in the cost adjustment for HVCRE loans," according to the white paper, although the adjustment appears to add about 100 basis points to interest rate cost.

The most notable HVCRE criteria are a 15% cash equity requirement—which borrowers can no longer meet with the appreciated value of their land—and a reduced ability to release cash flow from projects during the life of the loan. Furthermore, according to the white paper, "regulators continue to clarify the regulations, bringing uncertainty to the bank finance market. Borrowers now face higher pricing, greater equity commitments and diminished cash flow flexibility.

The full effect of the new regulations on construction lending hasn't been felt yet. "Although the nation's largest banks have already adopted these regulations, smaller banks are still early in the process," according to the Prologis white paper. "And, while smaller banks have seen a decline in their market share, they can be important lenders to entrepreneurial developers. New bank regulations and HVCRE may further change their landscape. The net effect is delayed access to capital and a more pronounced increase in the cost of capital for smaller real estate developers."