Prologis signs 60 million square feet of leases as customers run lean

What happened

Prologis, which calls itself the global leader in logistics real estate, reported on Thursday 15 October that it signed 60 million square feet of leases in the third quarter and ended it 95.6 percent occupied. ^{[1, 2, 5, 3]}

Net earnings for common stockholders were $816 million, against $763 million a year earlier, and total revenues were $2.388 billion, against $2.214 billion, the company reported. Chief executive Daniel S. Letter said: 'Customers are running lean on inventory, and excess capacity within their networks has largely cleared.' ^{[2, 3]}

Why it matters

Prologis leases buildings to about 6,500 customers in 20 countries, among them Amazon, Home Depot and FedEx. Letter said demand is 'supported by e-commerce, advanced manufacturing and the build-out of the data center supply chain.' ^{[2, 3]}

Rents on leases that began in the quarter were 38.0 percent above the leases they replaced on the company's net effective measure, against 49.4 percent a year earlier, the supplemental package showed. ^[3]

Leasing and building

Leases that began in the quarter covered 55.9 million square feet, against 65.6 million a year earlier, a decline of 15 percent, FreightWaves reported. Average occupancy was 95.1 percent, against 94.8 percent a year earlier, Commercial Observer reported. ^{[3, 4, 5]}

Prologis started $964 million of new buildings on its own share in the quarter, with no data center among them. Over nine months, data centers were $2.03 billion of its $4.09 billion in starts, the package showed. ^{[2, 3]}

Deals for data centers and power supply were 10 percent of new leasing, and 17 percent in the US, Commercial Observer reported. Letter said on the call that these are 'multibillion-dollar decisions' and 'a very lumpy business.' ^[5]

The company's outlook

For 2026 the company now guides average occupancy of 95.25 to 95.50 percent, against 95.25 to 95.75 percent before, and development starts of $5.0 billion to $5.75 billion, against $4.5 billion to $5.5 billion. Both figures are on its own share. ^[2]

'We think the recent move in rates will slow transaction activity and could put some pressure on values,' Letter said on the call, Commercial Observer reported. Finance chief Timothy D. Arndt said the balance sheet gives room 'to continue investing in growth even in a higher interest rate environment.' ^{[5, 2]}

What settles it next

The quarterly report on Form 10-Q is due by Monday 9 November, 40 days after the quarter for a large accelerated filer such as Prologis. The $18.8 billion combination with SEGRO, a British warehouse owner whose shareholders approved it, is expected to close in the first half of 2027, Commercial Observer reported. ^{[6, 7, 2, 4, 5]}

Who it reaches

Prologis (PLD) is direct: the results are its own. Amazon (AMZN) is adjacent as its largest customer, at 5.6 percent of net effective rent, and Home Depot (HD) as the second, at 1.7 percent. ^[3]