Prologis Inc Earnings - Q4 2025 Analysis & Highlights
Prologis Inc.'s Q4 2025 earnings call highlighted strong financial and operational momentum, with key discussions around data center expansion, strategic capital initiatives, and a positive market outlook for 2026. The company emphasized its leadership in logistics real estate and its growing presence in data centers, driven by customer engagement and disciplined execution.
Key Financial Results
Fourth quarter core FFO was $1.44 per share including net promoter expense, and $1.46 per share excluding net promote expense.
Average occupancy on an own-and-manage basis was 95.3% for the quarter and 95% for the full year, with period-end occupancy at 95.8%.
Net effective rent change was 44% for the quarter, contributing approximately $60 million of annualized NOI.
Net effective rent change for the year exceeded 50%.
Net effective lease mark-to-market ended at 18%, representing nearly $800 million of embedded NOI.
Same-store NOI growth was 4.7% on a net effective basis and 5.7% on a cash basis.
For the full year, net effective same-store growth was 4.8%.
Business Segment Results
Development platform, particularly in build-to-suits, continued to outperform, exceeding expectations and capturing market share.
Strategic capital saw the formation of two new investment vehicles in the US and China.
The data center business's power pipeline continues to grow, with expectations for a solid year of starts.
E-commerce represented approximately 20% of new leasing activity over the last year, making 2025 its best year since 2021.
International markets continued to outperform outside of the US.
Latin America showed robust consumption trends in Mexico and Brazil, supporting high occupancy and ongoing rent growth.
Europe delivered a solid quarter, maintaining strong occupancy and posting its first quarter of positive rental growth in two years.
Japan performed exceptionally well, with occupancy above 97% and outperformance relative to the market of nearly 600 basis points.
Capital Allocation
Approximately $900 million of value-maximized assets were sold.
$625 million was acquired at attractive discounts to replacement costs.
$1.1 billion in new buildings were started in the quarter, all of which were logistics projects and over 48% build-to-suit.
For the year, $3.1 billion was started, with build-to-suits representing 61%.
Total installed capacity in the energy business reached 1.1 gigawatts, surpassing the 1 gigawatt goal set four years prior.
Power access for the data center business expanded to 5.7 gigawatts.
72 megawatts of projects were stabilized.
A state-of-the-art turnkey facility was sold at compelling economics.
Industry Trends and Dynamics
Vacancy has peaked and rents are beginning to inflect across many markets.
Net absorption in the US was 59 million square feet in the fourth quarter.
Higher absorption levels exceeded completions for the first time since 2022, leading to a decline in US vacancy to 7.4%.
Market rents declined at their slowest rate since 2023, with many markets showing positive growth.
Demand remained strongest in large space formats, but occupancy increased across all size categories.
E-commerce continues to be a meaningful driver of demand, with large retailers expanding and diversifying their networks.
The threefold multiplier in space required for e-commerce provides a powerful tailwind.
Competitive Landscape
Prologis' leadership extends beyond scale, focusing on operations, commitment to excellence, long-term relationships, and anticipating future trends.
The company aims to widen its competitive moat through unmatched service, innovative solutions, and mission-critical reliability.
Private capital partners are increasingly seeking fewer managers who can deliver consistent performance across geographies and strategies, positioning Prologis as a partner of choice.
The company's global footprint is strategic, valued by customers, and a key driver of the platform's diversity and resilience.
Macroeconomic Environment
Uncertainty, including tariff policy, is now treated more as a planning assumption rather than an impediment.
Market vacancies are poised to improve over the course of 2026.
New demand is a key variable, with net absorption expected to approach 200 million square feet in 2026 versus 155 million square feet in 2025.
Decline in supply is helping, with deliveries on pace to be 180 million to 185 million square feet in 2026, down from 200 million square feet in 2025.
Vacancies are expected to move from 7.4% at the end of 2025 towards 7.1% to 7.2% at the end of 2026.
Growth Opportunities and Strategies
Extending leadership as a best-in-class operator through data analytics, site-specific energy solutions, and venture initiatives.
Capturing value creation opportunities in both logistics real estate and data centers.
Developing the next generation of modern, strategically located facilities.
Leveraging a growing power pipeline, deep customer relationships, and multidisciplinary expertise to develop critical infrastructure for data centers.
Enhancing shareholder returns through continued growth in assets under management.
Developing new vehicles and strategies that build on a track record of performance, transparency, and partnership.
The data center business focuses on procuring power, securing build-to-suit lease transactions, delivering world-class facilities, and harvesting value through asset sales.
Power access for data centers is distributed across Tier 1 and Tier 2 markets in the US and Europe, including Northern Virginia, Silicon Valley, Chicago, New Jersey, Dallas, Portland, Amsterdam, London, Paris, Frankfurt, Dublin, Austin, Las Vegas, Phoenix, Salt Lake City, Boston, Denver, Madrid, Milan, and Berlin.
Financial Guidance and Outlook
Average occupancy is forecasted to range between 94.75% and 95.75%, with an expectation for a seasonal drop in the first quarter before rebuilding.
Net effective same-store growth is forecasted to be in a range of 4.25% to 5.25%.
Cash same-store growth is forecasted to be in a range of 5.75% to 6.75%.
G&A forecast is $500 million to $520 million.
Strategic capital revenue forecast calls for $650 million to $670 million.
Development starts are forecasted to range between $4 billion and $5 billion on an owned and managed basis.
Approximately 40% of the development activity is expected to be in data centers.
Acquisitions will range between $1 billion and $1.5 billion.
Combined contribution and disposition activity will range between $3.25 billion and $4.25 billion.
Initial GAAP earnings guidance is in a range of $3.70 to $4 per share.
Core FFO, including net promoter expense, will range between $6 and $6.20 per share.
Core FFO, excluding net promoter expense, will range between $6.05 and $6.25 per share.
Net absorption is expected to approach 200 million square feet in 2026.
Deliveries are on pace to be 180 million to 185 million square feet in 2026.
Vacancies are expected to move towards 7.1% to 7.2% at the end of 2026.
Positive rent growth in aggregate is expected to emerge more clearly over the course of the year.
About two-thirds of the assumed logistics starts for 2026 are in the US.
Strong markets are seen in Latin America, specifically São Paulo and Mexico City.
Europe will see some starts in Germany, the Netherlands, and Northern Europe.
The Agility Fund will involve contributions of land from Prologis, marked up to fair value, which is reflected in the guidance.
The spec business typically leases up between seven and nine months, with a long-term average of seven months.
Build-to-suits come online immediately at project completion.