Prologis Inc Earnings - Q3 2025 Analysis & Highlights

Key Takeaways

Prologis' Q3 2025 earnings call highlighted record leasing, strong rent change, and advancements in the data center business, alongside increased guidance for same-store NOI growth and development starts. The call also addressed customer sentiment, market conditions, and capital deployment strategies.
  • Key financial results:
  • Core FFO, including net promote expense, was $1.49 per share. Excluding net promotes, core FFO was $1.50 per share.
  • Occupancy grew to 95.3%, an increase of 20 basis points.
  • Rent change during the quarter was 49% on a net effective basis and 29% on a cash basis.
  • The lease mark-to-market ended September at 19%, reflecting the capture of another $75 million of NOI during the quarter and a further $900 million of NOI as leases roll.
  • Net effective and cash same-store growth during the quarter were 3.9% and 5.2%, respectively.
  • Business segment results:
  • The data center business moved another 1.5 gigawatts of additional capacity to advanced stages.
  • Prologis is one of the largest owners of utility-fed power available for data centers, with 5.2 gigawatts of power either secured or in the advanced stage.
  • The energy business delivered 28 megawatts of solar generation and storage in the quarter.
  • Current energy capacity is 825 megawatts, on track to deliver on the 1 gigawatt goal by year-end.
  • Capital allocation:
  • Closed on $2.3 billion in financing activity across the REIT and funds, including a €1 billion raise at 3.5%.
  • In-place cost of debt is at 3.2% with more than eight years of average remaining life.
  • Had modest net inflows for the quarter across open-ended funds.
  • Exploring additional capitalization strategies to fully capture the data center opportunity.
  • Industry trends and dynamics:
  • Demand is improving, occupancy has formed a base, and rents are progressing through their bottoming process.
  • In the US markets, an estimated 47 million square feet of absorption for the third quarter held market vacancy steady at 7.5%.
  • The construction pipeline is depleting, and starts are below pre-COVID levels.
  • Market rent declines have been slowing, just over 1% this quarter.
  • E-commerce penetration is now 24% of US retail sales.
  • Competitive landscape:
  • Prologis' curated portfolio and platform outperformed the US by 290 basis points.
  • Global scale continues to serve customers, with real estate in 20 countries across the world's most dynamic markets.
  • Macroeconomic environment:
  • Customer sentiment is better, with strengthening customer sentiment, improved leasing velocity, and continued success in build-to-suit activity.
  • Larger occupiers are pursuing reconfiguration consolidation strategies with a shift toward network optimization, rather than contraction.
  • Growth opportunities and strategies:
  • Build-to-suits will represent over half of the development volume for the full year.
  • Signed an additional nine build-to-suits this quarter, driving the total to 21 so far for the year and amounting to $1.6 billion of total expected investment.
  • Every megawatt that can be delivered over the next three years in data centers is already in dialogue with customers.
  • Taking a deliberate and disciplined approach consistent with the build-to-suit strategy in data centers.
  • Integrating solar storage and off-grid energy solutions with real estate.
  • Financial Guidance and Outlook:
  • Average occupancy at the company's share is unchanged at the midpoint of 95%.
  • 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.
  • Increasing G&A guidance to a range of $460 million to $470 million.
  • Increasing strategic capital revenue guidance to a range of $580 million to $590 million.
  • Increasing development starts at the company's share to a new range of $2.75 billion to $3.25 billion.
  • Increasing combined disposition and contribution guidance by $500 million to a range of $1.5 billion to $2.25 billion at the company's share.
  • GAAP earnings are guided to range between $3.40 and $3.50 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 $0.02 increase from prior guidance.