Earnings call transcript: Prologis beats Q3 2025 earnings expectations

Prologis Inc. (PLD), a prominent player in the Industrial REITs industry with a market capitalization of $115.7 billion, reported its third-quarter 2025 earnings, surpassing Wall Street expectations with an earnings per share (EPS) of $0.82, compared to the forecasted $0.67, resulting in a surprise of 22.39%. The company also exceeded revenue forecasts, reporting $2.05 billion against the expected $2.03 billion. Following the announcement, Prologis’ stock price increased by 6.12%, reflecting positive investor sentiment. According to InvestingPro analysis, the stock is currently trading near its 52-week high of $127.65, with analysts maintaining a bullish consensus and setting price targets up to $140.

Key Takeaways

• Prologis’ EPS of $0.82 exceeded expectations by 22.39%.
• Revenue was reported at $2.05 billion, slightly above forecasts.
• Stock price rose by 6.12% post-earnings announcement.
• Record leasing activity with 62 million square feet signed.
• Occupancy increased to 95.3%, demonstrating strong demand.

Company Performance

Prologis reported a robust performance in Q3 2025, highlighted by record leasing activity and increased portfolio occupancy. The company’s strategic investments in data centers and renewable energy initiatives are driving growth. Compared to previous quarters, Prologis has consistently shown resilience and adaptability in a competitive market.

Financial Highlights

• Revenue: $2.05 billion, up from $2.03 billion forecasted.
• Earnings per share: $0.82, compared to the forecast of $0.67.
• Core FFO: $1.49 per share, excluding net promotes: $1.50.
• Portfolio occupancy: 95.3%, up 20 basis points.

Earnings vs. Forecast

Prologis outperformed expectations with an EPS surprise of 22.39%. The revenue also surpassed projections by a small margin, reflecting the company’s strong operational execution and market positioning.

Market Reaction

Following the earnings report, Prologis’ stock surged 6.12%, reaching $117.15 in pre-market trading. This increase reflects investor confidence in the company’s ability to exceed financial expectations and maintain growth momentum. The stock is trading closer to its 52-week high of $127.65, indicating strong market performance.

Outlook & Guidance

Prologis maintains a positive outlook, with full-year occupancy expected around 95%. The company anticipates rent changes in the low 50s and same-store NOI growth in the range of 4.25-4.75% net effective. Development starts are projected between $2.75 and $3.25 billion, signaling continued investment in growth opportunities.

Executive Commentary

• "Every megawatt we can deliver over the next three years is already in dialogue with customers," stated Dan, President, highlighting the demand for Prologis’ data center capabilities.
• "The best years of Prologis are still ahead of it," said Hamid, the outgoing CEO, emphasizing the company’s growth potential.
• "We are building a company of enduring excellence," added Hamid, reinforcing Prologis’ commitment to long-term success.

Risks and Challenges

• Potential supply chain disruptions could impact development timelines.
• Market saturation in key regions may limit growth opportunities.
• Macroeconomic pressures, such as interest rate fluctuations, could affect financing costs.
• Increased competition in the data center space may pressure margins.
• Regulatory changes in international markets could pose compliance challenges.

Q&A

Analysts inquired about the company’s data center business, highlighting its potential for value creation. Questions also focused on Prologis’ strategies for capitalizing on market rent growth and managing portfolio risks. Executives expressed confidence in stabilizing market vacancy and leveraging long-term customer relationships.

Full transcript - Prologis Inc (PLD) Q3 2025:

Conference Operator: Greetings and welcome to the Prologis Third Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Justin Meng, Senior Vice President, Head of Investor Relations.

Thank you. You may begin.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thanks, Shamali, and good morning, everyone. Welcome to our third quarter twenty twenty five earnings conference call. The supplemental document is available on our website at prologis.com under Investor Relations. I’d like to state that this conference call will contain forward looking statements under federal securities laws. These statements are based on current expectations, estimates and projections about the market and the industry in which Prologis operates as well as management’s beliefs and assumptions.

Forward looking statements are not guarantees of performance and actual operating results may be affected by a variety of factors. For a list of those factors, refer to the forward looking statement notice in our 10 ks or other SEC filings. Additionally, our third quarter earnings press release and supplemental do contain financial measures such as FFO and EBITDA that are non GAAP. And in accordance with Reg G, we have provided a reconciliation to those measures. I’d like to welcome Tim Arndt, our CFO, who will cover results, real time market conditions and guidance.

Amit Mogadam, our CEO Dan Leder, President and Chris Caden, Managing Director, are also with

: us today. With that, I

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: will hand the call over to Tim.

Tim Arndt, CFO, Prologis: Thanks, Justin. Good morning, and thank you for joining our call. The third quarter marked another period of solid execution with many encouraging signs across our business. We had a record quarter for leasing with signings of nearly 62,000,000 square feet, an uptick in portfolio occupancy and another very strong quarter in rent change. We see a more positive tone across the platform with strengthening customer sentiment, improved leasing velocity and continued success in build to suit activity, which taken together suggests the market has found its footing and the stage is set for an inflection in occupancy and rent.

Momentum also extended to our data center business. This quarter, we moved another 1.5 gigawatts of additional capacity to our advanced stages. Now with 5.2 gigawatts of power either secured or in this advanced stage, Prologis is one of the largest owners of utility fed power available for data centers. Translating this to dollars would amount to $15,000,000,000 investment as powered shell and as much as four times that if delivered in a turnkey format. For this reason, we have begun the exploration of additional capitalization strategies to fully capture the opportunity.

Our ability to combine real estate, power access, customer relationships and capital provides the foundation for one of the most significant value creation opportunities in our history, and we are well positioned and laser focused on its execution. With that as a backdrop, let’s turn to our results. Core FFO, including net promote expense was $1.49 per share and excluding net promotes was 1.5 per share, each ahead of our forecast. As noted, we had a record leasing quarter supported by a clear pickup in new leasing, which had been below historical levels for some time, but is now rounding out the picture together with healthy renewal activity and heightened build to suit demand. As a result, occupancy grew over the quarter to 95.3%, an increase of 20 basis points.

And the flight to quality persists to our curated portfolio and platform, evidenced by our two ninety basis points of outperformance in The U. S. Rent change during the quarter was 49% on a net effective basis and 29% on cash, highlighting the durability of our lease mark to market, which will provide meaningful rent change over the coming years even at spot rents. The lease mark to market ended September at 19%, which reflects the capture of another $75,000,000 of NOI during the quarter and a further $900,000,000 of NOI as leases roll. Putting it all together, net effective and cash same store growth during the quarter were 3.95.2% respectively.

In terms of capital deployment, we had a lighter quarter of development starts with expectations for a strong fourth quarter due to the specific timing of transactions. Two thirds of our volume in the fourth quarter in the third quarter was in build to suits with large global customers, many of whom rank in our top 25. We signed an additional nine build to suits this quarter, driving the total to 21 so far for the year and amounting to $1,600,000,000 of total expected investment. Beyond that, this pipeline continues to grow with dozens of viable deals on PLD owned land, and outcome of our close customer relationships and strategic land bank. We expect build to suits will represent over half of our development volume for the full year.

Finally, our energy business delivered 28 megawatts of solar generation and storage in the quarter. With eight twenty five megawatts of current capacity, we are on track to deliver on our one gigawatt goal by year end. Interest from customers remains robust against the backdrop of increasing energy prices and forecasted shortages in power. We continue to integrate our solar storage and off grid energy solutions with our real estate, another example of how Prologis continues to evolve with and for our customers. On the balance sheet, we closed on $2,300,000,000 in financing activity across the REIT and funds, which included a very successful €1,000,000,000 raise at 3.5%.

Our global access to capital remains one of the defining strengths of our franchise with an in place cost of debt at just 3.2% and more than eight years of average remaining life. In our Strategic Capital business, we had modest net inflows for the quarter across our open ended funds as investors begin to reengage following several uneven quarters. But at the same time, we’re excited by our progress on new vehicles that are drawing strong interest and position us well for the next phase of growth in this business. We look forward to sharing more on this in the fourth quarter. Turning to our customers.

Sentiment is clearly better as informed by our day to day discussions across the globe as well as in focused strategic dialogue like that in our Customer Advisory Board held late last month. Beyond improved decision making, larger occupiers are pursuing reconfiguration consolidation strategies with a shift toward network optimization rather than contraction. In keeping with the typical real estate cycle, we’d expect smaller and medium sized enterprises to follow suit. And out of interest, e commerce penetration, now 24% of U. S.

Retail sales, has expanded since COVID and continues this March higher as meaningful and secular driver of demand with 52 unique names transacting this quarter. In terms of operating conditions, overall, we see demand improving, occupancy has formed a base and rents are progressing through their bottoming process. In our U. S. Markets, we estimate 47,000,000 square feet of absorption for the third quarter, holding market vacancy steady at 7.5%, where we expect it to top out.

Meanwhile, the supply picture remains favorable as the construction pipeline depletes and starts are below pre COVID levels. Market rent declines have been slowing just over 1% this quarter, also evidencing the market shift. Our strongest markets in The U. S. Continue to be across the Southeast and Texas with solid absorption in Houston, Dallas and Atlanta.

The tone in Southern California is also improving. Although rents remain soft, leasing activity has turned up both in LA and the Inland Empire. Consistent with our prior view, we expect SoCal to lag the broader inflection in operating conditions in the near term, but outperform over the long term. Our platforms outside The U. S.

Are certainly a bright spot. Latin America again delivered excellent results, where Brazil and Mexico together have been providing the highest same store growth in our portfolio. Europe has maintained higher occupancy and more moderate rent decline relative to The U. S. And our Japan portfolio maintains its track record of exceptional occupancy overcoming the higher market supply of recent years.

With real estate in 20 countries across the world’s most dynamic markets, our global scale continues to serve customers and the benefits of this diversification is evident in our performance. Finally, on data centers, demand for our product has been exceptional. Every megawatt we can deliver over the next three years is already in dialogue customers. We’re taking a deliberate and disciplined approach consistent with our build to suit strategy. And by staying close to customers and their evolving needs, we have strong conviction in the depth of our pipeline and look forward to announcing on a handful of starts in the coming quarters.

Turning to guidance as we move into year end. Average occupancy at our share is unchanged at the midpoint of 95% and rent change will average in the low 50s for the full year. The range for same store NOI growth is increasing to 4.25% to 4.75 on a net effective basis and 4.75% to 5.25% on a cash basis. We are increasing our G and A guidance to a range of $460,000,000 to $470,000,000 and also increasing our strategic capital revenue guidance to a range of $580,000,000 to $590,000,000 In capital deployment, we are increasing development starts at our share to a new range of 2,750,000,000.00 to $3,250,000,000 And as a reminder, only previously announced data center starts are included in this guidance. We are also increasing our combined disposition and contribution guidance by $500,000,000 to a range of 1.5 to $2,250,000,000 at our share.

In total, our guidance for GAAP earnings to range between 3.4 and $3.5 per share. Core FFO including net promote expense will range between $5.78 and $5.81 per share, while core FFO excluding net promote expense will range between $5.83 and $5.86 per share, a $02 increase from our prior guidance. To close, the outlook for Global Logistics is strong and the demand for data centers and distributed energy systems is robust, all of which underpins our confidence in the long term and absolutely unique opportunity for our business. Our focus remains on disciplined growth, operational excellence and leaning in on these long term trends. These priorities have been central to Prologis since its founding and continue to shape every decision we make.

And as we reflect on the leadership that built this company and the enduring culture that Hamid has created, we do so with a deep sense of commitment and continuity. The foundation of excellence is strong, the strategy is clear and the opportunities ahead are significant and unmatched. Thank you. And I’m going to pass the call over to Dan to close out our prepared remarks before turning to Q and A.

Dan Leder, President, Prologis: Thanks, Tim. Before we move

Dan, President, Prologis: to questions, I wanted to take a moment to recognize Today marks his last earnings call as our CEO. This is his one hundred and twelfth call since we went public back in 1997. It’s really hard to sum up everything he’s accomplished in just a few words. We’ve all learned so much as part of the School of A and B and Prologis under his leadership, and it’s truly been a one of a kind experience. Over more than four decades, Hamid has built something special, a company that leads our industry, sets the standard for innovation and puts people, culture and customers first.

He’s created a platform that’s second to none, built on vision, courage and the ability to see around corners. For me, it’s been a privilege to watch him lead, to see how he balances ambition with humility and how he pushes all of us to think bigger and move faster. Hamid, on behalf of all of us at Prologis, thank you for your leadership, your trust and for everything you’ve done to make Prologis what it is today. You will likely never fully comprehend the impact you’ve had on the people in this room, this company or this industry over the last forty two years. We’re all grateful and we’re excited for what’s ahead with you as Executive Chairman.

With that, operator, we’re ready for questions.

Conference Operator: Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Jon Petersen with Jefferies. Please proceed with your question.

Jon Petersen, Analyst, Jefferies: Great. Thanks and congrats on the quarter. Hard to top Dan’s commentary there, but Hamid, thanks for all your honest commentary over the years. Really enjoyed starting earnings season with your call for the last one hundred and twelve. I guess I haven’t been around for all 01/2012,

Analyst: but for a lot

Jon Petersen, Analyst, Jefferies: of them. If I could start with a question on data centers, right at the top, you said you’re exploring additional capitalization strategies. Can you talk more about what that might look like if you’re looking at exploring establishing a fund to buy out properties upon completion or maybe more of a development fund or maybe just generally what your comfort level is on owning and operating data centers beyond development at this point? Thank you.

Dan, President, Prologis: Thanks, John. Let me start and then maybe Tim will pile on here. But it might be helpful for me just to lay out what’s going on in our data center business right now. We’ve talked a lot over the last couple of years about building an experienced and dedicated team from the industry. And we’ve been very successful in doing that, and we’re going to continue to build that team into 2026.

We also have really incredible operational synergies between our core business and this data center team. With our procurement platform, you look at our distributed energy business now, just really significant synergies. And then this pipeline that we have is huge. It’s really significant. 1.4 gigawatts of power and it’s secured or under construction stage or the 3.8 gigawatts in the advanced stages.

So really incredible what this team has done in a very short period of time. We are continuing with the same strategy we’ve been sharing along the way, which is build the suits with these hyperscalers. And it’s really amazing just the active discussions and conversations and lease dialogue with these customers across our entire pipeline. As Tim mentioned in the script, every megawatt we can deliver over the next three years is already accounted for in conversation. So we have a big tailwind behind us there.

And then if you think about our land bank, 14,000 acres of land that we own or control, you look at our 6,000 buildings in these infill locations and think about how well we are set up for not only the current wave of AI demand, but the next wave, which will be inference. So these are big numbers and we have taken the next step of starting an exploration over what the universe of opportunities are, what is the art of the possible for us in the data center business and capitalization. So we don’t have any specifics to share with you now, but we hope to in the coming quarters.

Tim Arndt, CFO, Prologis: And I will just pile on with one thought, Dan. It’s just that in the interim, the balance sheet is obviously very capable of taking a large volume of projects. We have almost $2,000,000,000 under construction in this last year or two, which we can easily grow given the scale and rating of the balance sheet.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, John. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.

Dan Leder, President, Prologis: Good afternoon. Thanks a lot for taking my question and congratulations, Samit. My question is on the net absorption during the period. I think, Tim, you called out $47,000,000 which is a pretty material acceleration from the prior two quarters. So is there a way to think about how much of that was kind of pent up demand from the uncertainty earlier in the year versus like what is kind of like the sustainable run rate?

And then also just if you could talk a little bit about the cadence of leasing through the quarter so we can get a sense of if it’s accelerating?

Chris Caden, Managing Director, Prologis: So yes, you’re right. Net absorption 47,000,000 square feet. Yes, there’s some catch up there from the second quarter. Parsing that parking the market, parsing the market statistics is not something that we can do. We can look at our own leasing activity and there’s a clear turning point in demand.

There’s a clear move higher. And so some of it is catch up, but there’s just a clear step higher. And this is revealed in a variety of things, including our pipeline, which remains full. And just for context, as you make an assessment of these numbers, know that we think roughly 60,000,000 square feet is a normal velocity, a quarterly velocity for the demand to improve in the coming quarters.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Michael. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Steve Sakwa with Evercore ISI. Please proceed with your question.

Steve Sakwa, Analyst, Evercore ISI: Yes, thanks. Good morning. And Dan, I echo many of the comments that you made about Hamid and really wish you luck moving forward. Maybe just following up on Michael’s question about the supply and demand. As you look out over the next year or so, would it be your expectation that supply and demand are kind of largely in equilibrium or do you think there’s still a little bit tilted more to supply outpacing demand?

And I guess what are those expectations then for market rent growth as you look out over the next twelve months?

Dan, President, Prologis: Thanks, Steve. Let me start and I’m going to pass it over to Chris. I think the way you need to think about this right now is we’re in a classic real estate cycle. Demand is strengthening and we’re seeing these large customers make decisions. That’s the real big early sign of a recovery.

And as supply remains low, as Tim mentioned in the script, it’s below pre COVID levels. And with occupancy and rents bottoming out, that’s a good sign for what’s to come. But Chris can give you some more specifics.

Chris Caden, Managing Director, Prologis: Yes, absolutely. So Steve, the key missing ingredient here was this new direction in demand that emerged over the third quarter. And so we had roughly 95,000,000 square feet of net absorption year to date, and we think a full year number will be roughly 125,000,000 square feet. So it’s on a path of improvement that will emerge. How that plays through in 2026, we think vacancy rates are topping out around this level.

And that’s based on where under construction pipeline stands today, which is 190,000,000 square feet. And so we’ll see deliveries decline into 2026, a lower hurdle for net absorption to begin to cause the market to tighten. And how demand comes through in the marketplace will be a product both of the pipeline we have today and the macro environment that emerges over the next ninety days and over the course of the year.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Steve. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis0: Hey, great. Congrats on Meet as well. Very impressive. I guess my question was just, you guys are looks like you’re calling for an inflection point here in occupancy, in rents and so forth. I just was hoping you could sort of double click and talk about sort of the different tenant categories, what you’re seeing on the ground and any sort of markets that are standing out like Southern California?

Thanks.

Chris Caden, Managing Director, Prologis: Sure. It’s Chris. So demand has clearly turned a corner. I hope you’re hearing that. And the market is an inflection point, an inflection period here.

This comes from greater breadth and depth of our customer discussions and their willingness to make decisions. We’re seeing it in leasing volumes as we described, including better new leasing, which had been quieter and in our sustained elevated pipeline and lease proposals. As we look at market contours and the contours of our pipeline, I’d say it’s substantially similar to the color we gave you ninety days ago. So there’s good activity across early proposals and more mature negotiations in terms of both new and renewal activity and across a range of markets. The one area that stood out to us was still clear strength in the larger size categories.

So that’s clear above 5,000,000 square feet, but it’s also broadening down to say over 250,000 square feet. So there is a move higher. As Tim described, the strength of our business is international in nature. So let’s not lose that point. It’s really across all the geographies he named.

And then in The United States, it’s really in the Sunbelt.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Ron. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Craig Mailman with Citi. Please proceed with your question.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis1: Thanks. It’s Nick Joseph here with Craig. And just to echo everyone else, congrats Hamid and best of luck. Just going back to the data center kind of comments, I understand the value creation opportunity on the development side. But how are you thinking about the normalized growth rate of data centers versus industrial just from an owned perspective?

Tim Arndt, CFO, Prologis: Well, I’ll take the first part of that at least. I mean, think if you think about so far what we have been doing on the exit side of these assets, selling them and then we’re contemplating a sell down, which will be maybe substantially the same thing. The way we think about its contribution to the growth rate is really the reinvestment of that value creation back into the core business. If we think about that in our logistics development portfolio, just to give you a rule of thumb, where we let’s pick $5,000,000,000 as a run rate of development investment and logistics. That ought to contribute about 150 basis points of additional growth per annum.

So you could use that to benchmark a similar concept to the value creation you might expect we’ll generate in this business.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Nick. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis2: Hi. I guess congrats, Hamid, on everything. And given that your last call, I guess there’s something you want to be able to talk about on the call. So I was wondering on the in the press release, you mentioned that you believe it’s one of the most compelling setups for logistics, rent and occupancy in the past forty years. I feel like we’ve talked about it a bunch and everybody’s talked about turning the corner, but everybody likes to hear your view.

So wondering last quarter you mentioned that market rent growth could happen in 2027. Wondering if that’s still your view and is it just I guess when we think of like more details on that comment in the press release, is it a setup for 2027 as opposed to like something more near term? I feel like it piqued some interest. So wondering if you could discuss a little bit.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis3: Sure, Caitlin. Here’s the way I look at all of these cycles, including recovery from the global financial crisis and other things. At the end of the day, it is the rate of return and replacement costs that drive long term rents. So we have a bogey out there. I don’t know whether it’s six months out, a year out or two years out.

I really don’t know. But I know when the market stabilizes, it will stabilize at a much higher level than today’s rents. So really what you and we and everybody else has to handicap is what is the catch up slope from where we are today to that higher trend line, which is going to grow over time with inflation and all that. But that trend line is significantly above today’s rents. We can argue how much and I think it’s about 40% over in place and probably 2520% to 25% above market rents today.

But we can debate that. But depending on how long out you assume for that, it will affect your growth rate, but those growth rates will be really high. And let’s assume that it takes another quarter or two before we get on that trajectory. It doesn’t matter because during a quarter or two, we lease relatively small amounts of space and those marginal differences in rent don’t matter much. What ultimately matters to the earning power of this company, which I acknowledge maybe past the window that you guys are most interested in or may not.

That is what excites me about this business.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Caitlin. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Vikram Malhotra with Mizuho. Please proceed with your question.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis4: Good morning. Thanks so much. And Hamid, really going to miss you on these calls. Hopefully, we hear from you in some other shape or form. Hopefully, you perhaps you’ll start a blog or a podcast, which will be helpful.

But congratulations and wishing you all the best for your next move. Maybe just a quick I guess, I want to clarify one thing. And then my question really is, you’ve talked a lot about bottoming. You said market vacancy is likely bottoming given Prologis typically outperforms. I’m sort of wondering what your view is on the direction of Prologis’ occupancy into 4Q specifically and broadly next year and what that means for rent growth in Prologis’ markets?

And then just to clarify, Hamid, you mentioned on Caitlin’s question, I just wanted to get a bit more specific on the next year or so that the biggest the big opportunity you see, specifically, is it more in vacancy? Is it more in rent growth? Or is there something else you’re thinking about bigger picture in terms of the opportunity? Thanks so much.

Tim Arndt, CFO, Prologis: Vikram, I’ll start. Good multipart question there. Well done. On occupancy, you can unpack our average occupancy guidance. Obviously, it provides for a range of outcomes, given just there being a quarter left.

But look, I’m reasonably confident we’re going to sustain around this level. It would be a consistent commentary with what we said about the market, and we’ll be looking for opportunities to build from there going into 2026. You asked about the market landscape. I think that was question two. And as it relates to the rent forecast, I mean, you described how hard it

Chris Caden, Managing Director, Prologis: is to have an inflection conviction at this point at an inflection point. And so let’s just level set. Market vacancy is 7.5% today. They’re going to hang around this level for a little while for a couple of quarters, let’s say, and improve through 2026 later in 2026. And that’s going be a product of the supply that’s coming into the marketplace.

By the way, development starts are 75% below peak and running 25% below pre COVID levels. And demand ran 47,000,000 square feet in the quarter and has a potential to improve over the course of the coming year, but perhaps not quite get back to normal just given the broader macro landscape notwithstanding the momentum we have with our customers. And so the thing that I think you’ll see on rent growth, without giving you a specific number, is the weakness, the softer markets are dissipating, and there’s a wider range of better and stronger markets, and that’s going to really evolve over the course of the next year.

Dan, President, Prologis: Let me just pile on one more thing before Hamid comments on whether or not he’s going to start a blog or a podcast. No. Okay. You got that answer already. But going into 2026, our priorities remain the same.

If you look at our build to suit pipeline right now, it remains robust and we’re having a phenomenal year with build to suits, 21 deals signed. 75% of that volume has already started this year.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis5: You should expect to see the rest of

Dan, President, Prologis: it start through the end of the year. And we’re in conversations on nearly 30,000,000 square feet of new deals. So really excited about that. It’s by far the best incremental return on our investment. And then you look at our data center business.

Data center business is significant and we’re going to continue to invest and keep that a high priority. And then if you also we’re going to have started spec in 18 markets this year. And I can see that actually opening up a bit more, especially as Chris mentioned internationally and then even in several pockets around The United States. So plenty of priorities and big things to look into 2026 and be excited about.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Vikram. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Sameer Kunal with Bank of America. Please proceed with your question.

: Yes. Thanks a lot. I guess congratulations from our side as well, Hamid. So Tim, can I ask you to provide more color on the customer sentiment? You talked about the strengthening in your opening remarks.

Clearly, there is the tariff news you get pretty much on a weekly basis creates the volatility. What are customers now at a point where they think this is sort of the new normal and are more comfortable making long term decisions as we think about sort of this inflection in occupancy? Thanks a lot.

Dan, President, Prologis: Sameer, this is Dan. Yes is the answer to your question. Customers have definitely become more desensitized to the short term noise as they look at making long term decisions. It’s great to see these well capitalized large companies leading the way because we typically see the small and medium businesses follow suit here. So overall, they need to make these long term decisions and can no longer be held back.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Sameer. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Nick Tilman with Baird. Please proceed with your question.

Analyst: Good morning out there and congratulations, Hamid. I guess kind of looking at the overall picture, we understand demand is kind of getting back to its long term average starts coming down. Tim, I just kind of wanted we hear a little bit on just credit risk, and private credit. I guess, you seeing anything in the portfolio that might give you a little bit of pause when you’re looking at just kind of vacancy peaking here and then the ability to build occupancy, any sort of risk within the portfolio or the broader market in general?

Tim Arndt, CFO, Prologis: No. I would say not in the way you’re asking. I mean bad debt expense is elevated. We’ve been talking about that over the course of the year and even coming into the year pre tariffs, we had an expectation for a little bit elevated level, may have expected in the 30s at the beginning of the year and our experience is probably going to be 40s in terms of basis points on revenue, well below some of the higher numbers we had seen in past crises. And we’ve taken the opportunity in this last cycle where it’s very challenging to get space and we could do more around customer selection and credit and did a great job improving the overall credit health of the portfolio.

And I think that shows up in these statistics.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Nick. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Vince Tibone with Green Street. Please proceed with your question.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis6: Hi, good morning and congratulations again, Hamid from the entire Green Street team on a great career. And then just I have one more question on the data center business. I just would like to understand how much data center development you’d be comfortable starting in a given year or having under construction in any given point in time. Really just trying to get at like how quickly you could potentially realize the large value creation potential from the data center land bank? Like what’s the constraint from doing 3,000,000,000 plus of data center starts in a given year?

It seems like demand is there and the power is secured. So I’d love to just kind of get a sense of what the realistic pace of starts or how you’re really thinking about that dynamic?

Tim Arndt, CFO, Prologis: Vince, it’s Tim. I don’t know that I see a limit. 3,000,000,000 is a very easy number honestly to handle. I think if we were talking about a speculative program, that’s where we would have a lot of consternation about what’s the appropriate number and getting out on a limb. Our approach here on build to suits together with the debt capacity in our balance sheet, the liquidity, the takeout options we’re exploring, we’re not constraining ourselves.

And that’s why we’re very active in pursuing. I hope it’s getting underscored here the incredible amount of energy we have now gathered and the volume of customer conversations that we’re having is also very high. So we’re going to see these volumes come through. We’re preparing for them and we’re ready for them.

Dan, President, Prologis: Yes. And Vince, way I think about it is power will be the constraint going forward. It won’t be capital.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Vince. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question.

Jon Petersen, Analyst, Jefferies: Great. Hamid congrats on all your success. Best of luck and I hope we can stay in contact. Can you guys talk a little bit about your updated thoughts on the transaction market and acquisition opportunities and whether you’ve seen any movement in cap rates or pricing in general as the ten year has showed some moderation more recently?

Dan, President, Prologis: Thanks Blaine. The transaction market has been surprisingly resilient. As a matter of fact, in 2025 are up about 25% year over year. So we’re seeing a lot more out there. Overall pricing is pretty consistent.

Market cap rates in the low 5s. And then I would say IRRs in the low to mid 7s, obviously depending on location and product type. And maybe one of the biggest drivers is how much WALT is left. People are more focused on shorter term WALT today than before.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Blaine. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Mike Mueller with JPMorgan. Please proceed with your question.

Dan, President, Prologis: Yeah. Hi, thanks. Congrats Amit as well and best of luck. I guess the question, can you talk about the pace of spec development leasing today and if you’re seeing notable improvement there recently as well?

Tim Arndt, CFO, Prologis: Mike, it is getting better, yes. We would typically see seven to eight months, I would say, on the lease of time across spec. That did extend probably over 23, 24 by a month, one months point on average. And we’re slowly seeing that come back to its historical norm. So yes.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Mike. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Nicholas Yulico with Scotiabank. Please proceed with your question.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis7: Thank you. So just looking at the rent change that you guys quote, the cash net effective rent change mark to market on leasing that happens in the quarter. It came down over the past year. And I was just hoping you could break out maybe some of the impact of that from one, just cycling through now some tougher lease expiration comps, maybe COVID leases impacting that number. And then also the renewals, if you could just talk about if since your retention is up, occupancy is starting to pick up, if you’ve been running a sort of occupancy first type strategy where you’re willing to negotiate more on renewals and that’s impacted mark to market.

And as we think about this potential for inflection here in your portfolio, is there some help that comes to the mark to market number because of any of these factors changing? Thanks.

Tim Arndt, CFO, Prologis: Yes. Let me start with the prospect of rent change and kind of how the lease mark to market is going to sustain. Even the fact that that’s come down to 19% this quarter, I’m quoting net effective here as 22% last quarter. It’s really important to contrast that with what our rent changes though in the immediate, which is in the low 50s as I mentioned. So it does really highlight how wide the potential for rent changes off of that average.

And this is also an opportunity to remind you to take a look at our expiration schedule available in the supplemental. We cast out what the expiring rent is over the next five years. You can unpack from that same schedule what we see as market rent and see positive rent change in the 40s is what you’ll get mathematically next year. You’ll see in the 30s, the following 20s and the following. That’s without any further market rent growth.

In fact, all the way through that expiration schedule, you’ll see uplift. So I think that is a not perfectly understood or appreciated story. So I’m glad you honed in on that. With regard to pushing rents, I think was sort of the second part of your question. We are.

You may recall in years past, we’ve talked about an active measurement we take where we kind of watch the teams and understanding how many deals are being lost due to rents. In the go days, 2021, 2022, we are looking to see a meaningful number there. We wanted to see that aggressiveness in negotiating. And that ground down to about zero maybe in 2023, some of 2024. We’re starting to see that lift up again, which is showing the courage as some of the market conditions tighten to lean in on those conversations and push rents again.

It’s going to happen in different markets at different paces, but it is beginning.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Nick. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Brendan Lynch with Barclays. Please proceed with your question.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis5: Great. Thank you. I want to echo everyone’s congratulations to Hamid. I think there’ll be case studies written on your career and the company built for decades to come. In terms of my question, you talked about a third of your customers serving basic daily needs, about a third serving cyclical demand and about a third catering to more structural trends like e commerce.

Could you talk about where you’re seeing the biggest changes in leasing and which of these buckets have more or less strength at present?

Chris Caden, Managing Director, Prologis: Sure. It’s Chris. I’ll jump in. So where are the areas of biggest strength? I think for sure e commerce is part of the story.

It’s running at nearly 20% of new leasing. And so that’s an area of strength. That’s a global phenomenon. That’s a range of markets phenomenon. It’s also particularly infill as service levels continue to improve.

So ecom would be part of that story. And then I would say stable growth businesses, so your food and beverage, your medical companies, These are companies who are investing in their supply chains to improve service levels and also manage their costs. They’re looking at their networks. They’re looking at their labor spend and managing their costs. And so there’s a supply chain investment there.

Then So the question would be maybe where is there softness? And I would offer that there is some cyclical spending categories that are subdued. So I look at the auto space. I also look at housing related categories. So for example, furniture.

Those are areas where perhaps high interest rates have led to less robust growth in those industries generally. And so we have fewer requirements coming in from those categories.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Brendan. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis8: Hi, good morning. Thanks so much and congrats, Samid. Best of luck. I wanted to ask about the revised guidance. It implies a sequential decrease in core FFO of about $06 at the midpoint.

Just curious if you can discuss some of the moving pieces that we should be thinking about some of the puts and takes heading into the fourth quarter and as we think about 2026?

Tim Arndt, CFO, Prologis: It’s one of the there’s a few elements here, and they’re going to point to the need to rely on the kind of the full year to step back. A lot of what occurred in the third quarter were some timing really in two categories I’d highlight. One is in the timing of sales of investment tax credits. These are credits, you may recall, that are generated out of our solar and energy business. We generate more credits than we can use on our own return.

We sell excess credits. That happens upon the completion and stabilization of particular projects. And that timing across quarters can be uneven. We had a particularly large quarter of that in the third quarter, and you may have seen that represented in the other income line in our P and L. That is no change to our full year forecast.

That’s fully expected on the full year. It’s just the lumpiness between quarters. So between that and the other larger area would just be G and A. We had a lighter G and A quarter due to the timing of some particular items. It will be a little bit heavier in the fourth quarter.

Those two things, when normalized, explain what looks like a deceleration. And if you’re trying to unpack kind of a run rate looking ahead of 2026, I’d use more of the second half of the year versus the fourth quarter will tell you a little bit more. On that point, as we look ahead to 2026, I’d call back to the building blocks that we’ve talked about in the past of what long term earnings ought to look like for Prologis, which is high single digits. We get there through not just the base of same store growth, but after leveraging that with our financial and operating leverage, piling on the value creation accretion we spoke about earlier, the contributions from the Essentials businesses, these are all the things that give you there. Into 2026, that’s all in play with two headwinds to continue to be mindful of.

One would just be about the march up on interest rates here that is still present. With the long average remaining life we have in our debt portfolio, it will be moderate, but it is kind of anti accretive to the bottom line, if you think about it in that way, and that will still be in play for us. And the other thing that is will be occurring as we go through this transition in capital deployment, last year, 2024 was our latest year of development starts since our merger, which is really kind of incredible to think about. So its contributions at stabilization, which will be broadly in 2026 to that growth rate are nearly absent, they’ll be quite low. At the same time that we’re really excited about the capital we’re going to be reinvesting into not only just logistics, but also data center.

So that deployment drag, as we’ve called it in the past, will be a bit more present next year. I think a simpler way of thinking through all of that might just be that a lot of the way we’re looking at 26% right now feels like the way we were looking at twenty five percent one year ago. So hopefully that helps.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, Todd. Operator, next question.

Conference Operator: Thank you. Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed with your question.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis9: Hey, congrats to Hamid certainly on the Mount Rushmore REIT CEOs in our book. But I’d like to ask about the direction of same store NOI, given your guidance for the year. It implies basically that that slows down to about 3.5% in the fourth quarter despite occupancy improving. I wanted to see if that was a realistic figure for you. And also if you can remind us how you treat solar income in same store, is it part of your same store results given they are additive to existing assets?

Tim Arndt, CFO, Prologis: Yes. John, a statistic you guys can’t see from our disclosure is what is the average occupancy within the same store pool itself. And given our M and A and a lot of changes to what comprises same store, it can be a markedly different number at times. And in that regard, the average occupancy in that pool a year ago was quite high actually. And so we have that comp to work against here in the fourth quarter and that’s really what you’re probably seeing in the deceleration.

Rent change is really what I would stay focused on and that’s going to remain very, very strong. Yes, solar revenues and their expenses do appear in NOI. They are very small at this stage, would highlight and relatively flat probably across years. Their growth rate is not as significant as what we hope to see in the logistics front.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis: Thank you, John. Operator, final question please.

Conference Operator: Thank you. Our last question comes from the line of Craig Mailman with Citi. Please proceed with your question.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis5: Hey guys, thanks for the follow-up here and me to echo everyone and say, you’ll be missed and best of luck in the next chapter. And I guess since I’m the last question, I’ll try to pop to in here. Just a clarification on Nick’s earlier question about how you guys think about the growth rate for the data center side. I guess we were thinking more same store growth of a hyperscale portfolio versus that of an industrial portfolio from an own perspective and how you guys think about that as you’re evaluating these different structures to potentially hold deals longer or in perpetuity? And then the second question, Tim, I know in the past you’ve talked about the gap between new lease signings and when they actually commence.

And so I’m just kind of curious from an average occupancy perspective with the reacceleration of leasing you had here in kind of the third quarter and hopefully into the fourth, when we should really start to see that average occupancy inflect quickly back up into 95%? And because I guess everyone’s asking about same store and earnings and that would be, in my view, probably a big piece of that acceleration.

Tim Arndt, CFO, Prologis: Hey, Greg. So I think that the way you’re framing some of the growth discussion around data centers is just not how we’re thinking about it. Going back to, I guess, was Nick’s comments, we really do think about the value creation reinvestment back into our core business. I recall Hamid’s comments on this back at our Investor Day in 2023, and we’ve stuck with that. Now we may retain some interest as we’ve been talking a lot about here.

But in that regard, then its contributions to base rent and same store growth will be relatively small, right, because we’ll just have a small proportionate share of those earnings. And I think I’d also highlight, I’m not sure if this was intimated in your question, but we wouldn’t look at our willingness to stay in the business or grow it more or less based on its same store growth profile. That’s an earnings concept, that’s a GAAP concept. We’re going to look at all of these investments from a total return and value creation perspective and that’s what you see in strategy. Do you want to hit occupancy?

Hey

Chris Caden, Managing Director, Prologis: Craig, I’m going to understand your question on returning to 95% is really a market question given where the company is leased. So just to be clear, the market is 7.5% vacant today. And we see it hanging here for a period of time as demand normalizes in the coming years, let’s say. And that will present opportunity, that will present recovery opportunity. And I want to make a long term comment on that market vacancy.

We enter this new phase of the market at a substantially lower market vacancy as compared to prior cycles. We’re talking about hundreds of basis points of superior starting point as compared to the prior cycles. And so that’s going to set up the market for the rent dynamic and the optimism that Hamid shared earlier.

Conference Operator: Thank you. And ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call back over to management for closing remarks.

Justin Meng, Senior Vice President, Head of Investor Relations, Prologis3: Thank you. This is Hemi. And thank you, Dan. And so many of you said so many nice things in this forum and elsewhere in the last couple of weeks. Before I wrap it up, I just wanted to share a brief personal note with you guys as my role as CEO.

Yes, it has been forty two years, twenty seven of which have been a public company and 112 calls. I guess Warren Buffett has beaten me on longevity, but since he doesn’t do calls, I think I’m going have this record on calls for a while. But when we started this business in ’eighty three, it was a tiny startup. The world was just a very different place in terms of our industry. Today, Prologis is one of the most valuable property companies in the world and the business has become highly professionalized and has grown in its scope and global footprint.

To witness that arc and to have had the privilege of leading this company through it all, it’s been surreal. We’ve navigated financial crises, geopolitical shocks, more than a few once in a lifetime events. Sometimes it feels like one of those every quarter. But here’s the truth. Our success has very little to do with me.

It’s been really the result of working with great colleagues, great partners, service providers, investors, loyal customers and of course a generation of you analysts and your many questions, many pesky questions because it made us better. That and a little good fortune and maybe a few good decisions along the way have been what has made this company what it is today. What I’ll remember is not the deals or the numbers, but really the people and the culture. And that’s what the foundation and the secret sauce to this company. So I’m stepping aside with complete confidence and I better be that way since more than half my net worth is invested in this company.

So I take this transition very seriously. And I know that our next chapter is in the hands of an exceptional leader supported by a terrific team. They embody the same vision and values that have always defined and driven Prologis. These are the people who will make Prologis even will take Prologis even further. I really believe, and I want to underline this, and I say it every year almost, that the best years of Prologis are still ahead of it.

We are building a company of enduring excellence. It’s been our mission, and I know we’ll continue to guide everything we do. So to all of you, colleagues, customers, investors, analysts and the press, thank you for your trust, your candor and your partnership. It’s been an honor of my professional life to lead this company, and I couldn’t be prouder of where we are and where we’re going. Okay, Dan, and the team will speak to you next quarter and I may be asking the questions then.

Thank you. Goodbye.

Conference Operator: Thank you. This concludes today’s conference and you may disconnect your lines at this time. We thank you for your participation. Have a great day.

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