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San Francisco–based Prologis specializes in supply-chain and logistics real estate. Founded in 1983 as AMB Property Corp., the firm initially focused on investments in office and industrial spaces, as well as community shopping centers, on behalf of major institutional investors. In 2011 AMB merged with Prologis, creating a portfolio of $40 billion in assets under management globally. Currently, Prologis controls more than 1 billion square feet of warehouses and distribution centers used by brands including Amazon, Home Depot, and FedEx. The company reported $1.96 billion in revenue during the first quarter of 2024.

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

Hamid R. Moghadam

Cofounder, Chairman, and CEO

Carter Andrus

Chief Operating Officer

Tim Arndt

Chief Financial Officer

Joesph Ghazal

Chief Investment Officer

Karsten Kallevig

Managing Director, Global Strategic Capital

Dan Letter

President

Susan Uthayakumar

Chief Energy and Sustainability Officer

Prologis (PLD): Company Profile, Stock Price, News, Rankings

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Prologis

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Greetings and welcome to the Prologis Second 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, Abhishek Castilla, Director of Investor Relations. Thank you. You may begin.

Thanks, Molly, and good morning, everyone. Welcome to our second 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, please refer to the forward looking statements notice in our 10 ks or other SEC filings. Additionally, our second 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 Arendt, our CFO, who will cover results, real time market conditions and guidance Hamid Mogadam, our CEO Dan Leder, President and Chris Caton, Managing Director are also with us today. With that, I will hand the call over to Tim.

Thanks, Avishek. Good morning, everybody, and thank you for joining our call. The second quarter exceeded our expectations, reflecting the strength and versatility of our team and portfolio in a challenging environment. Against a backdrop of subdued net absorption and a modest rise in market vacancy, we outperformed our occupancy expectations and the markets, delivered meaningful rent change and same store growth and achieved another strong quarter in build to suit activity, including continued momentum in our data center business. If we were to sum up the mindset of many of our customers particularly our largest ones, we'd say that they are increasingly looking past the headlines and what has been an evolution of their thinking over the last few months as those headlines constantly change.

While net absorption has been muted, new leasing is occurring and customer interest is promising as reflected in the aggregate size of our leasing pipeline. That same momentum is also apparent in our build to suit activity, which continues to grow and is well diversified across geographies and customer segments. At the same time, the supply pipeline is depleting and development starts in our markets remain low setting the stage for favorable conditions as demand improves. This together with the over 20% spread we see between market and replacement cost rents are important precursors to the next cycle of market rent growth. Turning to our results.

Core FFO including net promote income was $1.46 per share and excluding net promotes was $1.47 per share each ahead of our forecast. Occupancy ended the quarter at 95.1% down just 10% sequentially and further widening our outperformance to the market now at two ninety basis points. We continue to unlock our lease mark to market by delivering strong rent change across the global portfolio. During the quarter, we monetized an additional $75,000,000 of NOI through rent change, which was 53% on a net effective basis and 35% on cash. The net of this puts our lease mark to market at 22% at quarter end.

Net effective and cash same store growth during the quarter were As a reminder, fair value lease adjustments which are non cash and driven from the purchase accounting related to our 2022 and 2023 M and A continue to drag our net effective same store and bottom line earnings growth by approximately 100 basis points. In terms of capital deployment, we started over $900,000,000 in new development starts, nearly 65% of which was build to suit activity across seven additional projects in both The U. S. And Europe.

Beyond this activity, we have signed agreements for an additional three build to suits post quarter end. Our build to suit starts for the first half totaled $1,100,000,000 which is the largest start to a year that we have ever had. The strong demand by some of our biggest customers underscores our observation that many of them are moving beyond the noise and making significant capital investments into their business. Dollars 300,000,000 of the starts relate to an incremental investment in our ongoing data center development in Austin, Texas with a top hyperscaler. In addition to our growing development volume, we continue to procure power adding another 200 megawatts to our advanced stages category bringing that total to 2.2 gigawatts.

As a reminder, we have an additional 1.1 gigawatt fully secured plus 300 megawatts currently under construction. Finally, our energy business, we continue to make steady progress toward our goal of one gigawatt of solar production and storage by year end with nearly 1.1 gigawatts either in operation or under development today. While recent legislative changes in The U. S. Will reduce the incentives for new projects over time, we expect the consequential upward pressure on energy prices to uphold returns.

On a go forward basis, we still see meaningful opportunity in The U. S. And remain committed to and are excited about the broader global potential of our distributed energy platform, which is expanding in its capabilities and offerings. On the balance sheet, we closed on $5,800,000,000 in financing activity which included the $3,000,000,000 recast of one of our three Prologis global credit lines at a reduced spread. This facility contributes to the over $7,000,000,000 of liquidity we held at quarter end.

We also expanded our commercial paper program this quarter adding a €1,000,000,000 facility, which should generate an additional 40 to 60 basis points of savings in line with our experience in The U. S. Our strategic capital business saw net outflows in our open ended vehicles during the quarter of approximately $300,000,000 Beyond our existing vehicles, our teams are at work developing new offerings more representative of the breadth of our activities, which we look forward to reporting further on in coming quarters. Let me now spend a few moments describing our markets and experience with customers this quarter. To level set market rents declined approximately 1.4% during the quarter and values were essentially flat.

In The U. S, net absorption was subdued at 28,000,000 square feet and market vacancy ticked up 10 basis points to 7.4%. Operationally, we continue to see customers recalibrating not retreating and remaining active in signing leases even if at a slower pace. While the full quarter of activity was modestly below normal, leasing velocity did accelerate over the months of the quarter with June indeed the strongest. As has been the case for some time, renewal activity has been very healthy while new leasing remains slow.

We're not surprised by the dynamic given the larger investment and more deliberate nature of new leasing, but we're encouraged by a series of data points across our proprietary metrics and customer dialogue, which suggests that demand is piling up and could improve greatly with some clarity out of policy and the effect it's having on the backdrop. Of those data points, first would be from the sentiment implied by our leasing pipeline, which stands at 130,000,000 square feet reaching historically high levels in recent weeks. We see it as reflecting both a significant interest and need for space as well as a lengthening of the time and decision making, which we expect to see show up in future quarters through longer gestation timing as deals get made. It's also clear that utilization both of gray space and within 3PL capacity is rising. Our build to suit pipeline remains full with over 30 projects representing more than 25,000,000 square feet in active dialogue.

This level of activity underscores how larger customers with the resources and scale to think long term are being strategic consolidating operations and positioning for growth. Finally, our broader customer dialogue simply reflects an emerging bias towards action summarized well by one prominent user describing the exhaustion of adapting to shifting tariffs and concluded that they need to just run their business and will quote figure out the tariff details when there is some clarity. All told, while we expect conditions to remain choppy over the next few quarters, the market is holding up reasonably well. Looking ahead consistent policy and settled trade arrangements will certainly help and be a key determinant of the overall pace of net absorption. Turning to guidance in contrast to the uncertainty we faced in early April, we now see enough stability in the balance of the year to narrow and increase our guidance.

Average occupancy at our share will range between 94.7594.25%. Rent change should remain strong through the second half and average in the low to mid-50s for the full year. Same store NOI growth will range between 3.754.25% on a net effective basis and 4.25% to 4.75% on a cash basis. We are maintaining our G and A guidance of $450,000,000 to $470,000,000 and increasing our strategic capital revenue guidance to a range of $570,000,000 to $590,000,000 In capital deployment, we are largely holding the range for net sources and uses in the year, but increasing guidance within the offsetting categories. Most notably, we are increasing development starts at our share to a new range of 2,250,000,000.00 to $2,750,000,000 which is reflective of the additional data center start not previously guided as well as improved visibility in logistics starts due largely to our build to suit success.

We expect to keep up a historically higher mix of build to suits over the balance of the year. And as a reminder, future data center starts are not a component of this guidance. We are also increasing our combined disposition and contribution guidance to a range of $1,000,000,000 to $1,750,000,000 again at our share. In total, our GAAP earnings guidance calls for a range of $3 to $3.15 per share. Core FFO, including net promote expense, will range between $5.75 excluding net promote expense will range between $5.8 and $5.85 per share, a $0.45 increase from our prior guidance.

The higher midpoint is predominantly due to higher NOI and strategic capital revenues. To close, we're encouraged by the steadiness of the quarter and the leading action taken by many of our customers who continue to build out their supply chains amid ongoing macro uncertainty. While headlines remain noisy, the underlying activity in our portfolio reflects a market that is active and moving forward. In that context, well located logistics real estate has proved to be a strategic asset, especially on our platform. As broader economic uncertainty begins to clear, we remain confident in the long term trends driving our business.

Our strategy is grounded in serving customers at the center of consumption, the constant in all of this and our team continues to execute at a very high level. With that, I will turn the call over to the operator for your questions.

Thank you. We will now be conducting a question and answer session. Session.

Our first question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.

Great. Congrats on a strong quarter. I think the release noted that the pipeline, the leasing pipeline had reached historically high levels. So I'd just love to hear a little bit more about just what the post Liberation Day impact has been, sort of any categories to call out? And then if you could tie that commentary to the decision to increase development starts and acquisitions, how you're feeling about sort of the outlook? Thanks.

So the pipeline is promising even amid some of the subdued decision making like Tim described. The pipeline is up 19% year on year. One of the hallmarks here is diversity. We see good balance and good growth across different deal stages. So that's both early proposals as well as more mature negotiations.

We also see a good balance and growth across different deal types. So that's both renewal and new. And we also see good diversity across different customer industries. So where is some of the differentiation? One of the main hallmarks of this growth is concentrated growth above 100,000 square feet.

So there are more larger customers in the pipeline. And then Tim also talked about 3PLs engaging in a greater way. They're working through their spare capacity and in some leading markets really beginning to need more space.

And then Ron on the development start front that $1,000,000,000 increase includes the $300,000,000 data center start that Tim mentioned in the script and the remainder is about half build to suit and half spec. We've got a very strong build to suit pipeline right now we're working through. It's much larger than it's been over the last couple of years. You heard we had a pretty strong signing. Actually, had a record number and amount signings there of $1,100,000,000 in the first half so far and a handful so far already before the call here in July.

And then overall, have $41,000,000,000 of opportunities in our land bank and most of the spec you're going to see is going to be outside of The U. S. That's Japan, India, Brazil, Latin America or excuse me, Mexico. And then in The U. S.

You will see maybe a couple of starts in the Southeast or maybe infill coastal markets.

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

Thanks. Good morning. Tim or Hamid, I don't know if you could provide just maybe a little bit more color on sort of the cadence of leasing. I realize April was kind of a dark time when you guys reported Q1, but could you maybe give us a sense of just the pace of leasing kind of just trying to think kind of 1Q into then kind of the April, May, June? And what did that exit velocity look like in June heading into July?

Yes. Steve, this is Dan. I'll start and maybe get some color from one of the other guys here. But if we take you back to ninety days ago, on the call, we actually talked about volume being 20 down from normal. This was two weeks after April 2 and the tariff surprises.

So call that maximum uncertainty time. And we actually quoted that number to highlight how much volume was actually happening despite the tariff surprises. Unfortunately, think that did create some confusion. And that's not a stat that we're going to continue to give. Looking at too short of a duration over a quarter is not really indicative of a trend.

What we saw happen throughout the rest of the quarter was acceleration through May and June and then the quarter ended up only down about 10% from normal.

And so just in terms of what we're seeing over the last couple of weeks, Tim shared the color in his remarks. And so we really try to zoom out and look at a wider range of metrics. So it is lease signings like you asked. It's also the pipeline like we just covered. It's the build to suit dialogues.

It's the customer engagement. We really take a full picture approach to be sure we're giving you a complete update.

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

Hi, everyone. I guess, I was wondering if you could give us some more details on the guidance. So Tim, you mentioned that higher NOI and strategic capital drove the midpoint FFO guidance increase. But I guess with occupancy expectations unchanged despite the stronger 2Q, it also seems like pricing is kind of in line with expectations. So any more details on that kind of what's better than previously expected?

Sure. I mean the environment for one has just calmed pretty significantly since April. We also have a shorter number of months left in the year obviously. So we have improved visibility that gives us a lot of confidence in the guidance both the increase and also reflected in the narrowing. I referred to some outperformance in the quarter.

If you recall back to April, we also cited outperformance there even we opted to leave guidance in place at that time given the headline. So a few of those pennies are permanent to the year is the point there. The remainder coming out of NOI is reflected in same store despite the same midpoint, which is really once again narrowing of the range expressing more confidence. And then within that 50 basis point range, our belief that we're just going to land at the stronger end of it by the end of the year.

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

Good afternoon. Thanks a lot for taking my questions. Customer dialogue and data points seem to be supportive of demand building, but you also said that you expect conditions to remain choppy over the next few quarters. So how are you thinking about the timing of the growing pipelines translating to signed leases? And what's is there anything in particular that it would take to kind of convert this pipeline into signed leases? Thank you.

Hi, it's Chris. I'll jump in and some of the other guys may as well. Look decision making remains deliberate and so we see the pipeline building. Tim described a dynamic of the deals beginning to pile up. And when we speak with customers this is really about clarity on the macro front.

And when we look at the headlines, when we look at economist forecasts, there's caution in the back half of the year. And so we will see this play out over the balance of the year and that's what we're really paying attention to.

Look, we've been in a condition of constant uncertainty and I know that's a favorite word in the financial industry, but having done this for a long time, last year it was all about Ukraine and whether the Fed was going to cost, I guess going back eighteen months. That was the uncertainty. Then when the election was settled, there was a lot of excitement about pro business policies and the like. And then basically you had April 2, the Liberation Day. So I mean, it is very, very difficult to predict anything for any length of time.

But with every passing day, there's more water building up behind the dam. And we're seeing evidence of this with the largest customers. They just can't basically go to sleep without taking more sleep more space. So that's what you're seeing is their ability to defer is getting reduced with every passing day.

Thank you. Our next question comes from the line of Tom Catherwood with BTIG. Please proceed with your question.

Thank you and good afternoon everybody. Maybe Tim or Chris, hoping you could help us square up the leading indicators. Space utilization is moving higher and proposals are up, lease gestation is down, but the IBI activity index dropped to the lowest level since the first quarter of twenty twenty three. What is driving the bifurcation between these metrics? And kind of how should we think of them as an indicator going forward?

Yes. You do need to take a sort of full picture view of all these different metrics. And given the volatility Hamid just described, they're each going to depict different things. And also please keep in mind some are retrospective and some are prospective. And so you ask after some of our customer survey data that you see in the supplemental there, I think they're doing a good job of describing the landscape.

So for example, utilization that built in the quarter 85%, up 50 basis points, that's a meaningful increase and is approaching a two year trend. And this is reflecting both growth in the supply chain as well as some inventory build. Now at the same time, the IBI activity index measures that velocity of the product moving out. That has moved lower and it's consistent with the softer economic climate this uncertainty. Well, the third point which we've already covered on the call is simply the pipeline building and customers measuring how they make decisions in this landscape.

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

Hey, good afternoon. I just want to kind of circle back to me your comment and just some of the other comments in the call about conversations with tenants where the water is building, the dam is getting more full. On the one hand, you have the tariff uncertainty. On the other hand, you have the OOBBB bill pass, which is stimulative. You have some accelerated depreciation there, So you have some offsetting forces and your leasing pipelines at the highest rate it's ever been.

I just how at what point do you think a larger percentage of tenants just become comfortable being uncomfortable with the uncertainty and have to run their business and really that logjam starts to break? I'm just trying to get a sense as we head into the back half of this year and into next year, right, how this could trend, particularly from a net absorption perspective where, even with things kind of being uncertain and choppy, you guys, you held average occupancy steady, you're through part of your expiration schedule and it sounds like on the build to suit side, the new leasing side, you're starting to get some momentum. So I don't want it sounds like you guys are trying to maintain some discipline around setting expectations. But if you had a kind of couch it on the high and the low end of your probabilities of things really accelerating here in second half into first half of next year, kind of where do you peg that given all the conversations that you're having with tenants?

I think I understand the question. Basically, I'll speak for myself. I don't really care about the next quarter or following quarter because it's so dependent on what comes out of Washington. And people make these decisions in the short term based on emotion. What I do know is that we have a very significant mark to market.

I know that there is shortage of labor coming up in the construction industry because of the immigration policies. I know the government is spending a lot of money on chip plants, putting extra pressure on demand for construction, all this data center stuff and all this stimulus that's going to come in from ITCs. So to make a long story short, I'm very comfortable when we take two, three, four years out, given the escalation in replacement cost and rates are not going to go through the floor. So the rates times replacement cost gives you the rents that you expect in the long term. But I don't know what the path to that will be over the next quarter or two.

It's just not the way we run our business. And maybe you guys are giving us more credit about having that clarity than we deserve. So feel great about the business. I think every bit of business that's delayed is going to translate to more business in the future. And one other concept I'll throw out at you and those of you who've been listening to us for probably too long have heard this.

In good markets, people are 10% to 15% more optimistic. In markets that are choppy or risky, they're 10% to 15% more pessimistic. That's a 30% swing. That immediately goes the other direction when two tenants compete for the same space and one of them loses out and then loses out again. So FOMO is a big factor about people's confidence to move on and generally have found that people take more comfort in being among other people making the same sort of decision than being somewhat contrary.

So equally long answer to your question, but there you have it.

Thank you. Our next question comes from the line of Ki Bin Kim with Truist Securities. Please proceed with your question.

Thank you. Good morning. In regards to the 136,000,000 square feet of leasing proposals, I was wondering if you can provide some more color around it. For example, like how much of that is renewal versus net incremental demand? And historically, what has your conversion rate been in this kind of proposal basket?

And ultimately, I'm just trying to gauge going back to the building level of water behind the dam, how much that can actually net impact Prologis going forward?

So let me give you a perspective and then the other guys can throw in the more specifics around it. I think of leasing as having three components. One is renewal leasing and that tends to be very, very strong in times of higher uncertainty because, the best easiest decision to do is to make do with what you have and just kick the can down the road until you really have to make a decision. So that part of our business is much stronger than normal. Then there is new leasing, which is somebody all of a sudden deciding that they need more space because they didn't think about it two years later to go after a built to suit, two years earlier to go after a built to suit.

And that business is is slower than normal for sure. Because if every time you move, you gotta buy new equipment, new racking, you know, refitting your space, probably hiring some new employees. It's a very expensive proposition. And in a choppy environment, you got to do less of that than just kicking the can down the road. And then there's finally built to suit activity, which I'm going go on a limb and say this is the strongest it's been in my career.

So people who can plan in the long term are also I think thinking the way I'm thinking about it, which is they're looking out a couple of years by the time these projects are fully operational and they look at the factors driving the long term health of their business like e commerce and things like that and they're feeling good about it. So the only part of our business that's slow is leasing of spec space.

Hey, it's Chris. I'll just jump in on some of the details. And I'd also point you to my earlier remarks on the pipeline talking about it's up 19% and there's really good balance. And so the growth rates are sort of similar across multiple of these metrics whether it's new versus renew, whether it's early proposals versus mature negotiations. I talked about size being a difference.

That's one area where larger deals just take longer to come together. And so you're going to see that represent an outsized share. That doesn't take anything away from the fact that the larger scale requirements are the things that are really lifting the market today.

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

Thanks for taking the question. Good afternoon. Maybe just, to meet up just stepping back, I understand sort of quarter to quarter, but just looking out sort of two, three years with call it 7.5% vacancy, the Japanese you've referenced. In this environment, what scenario do you see sort of rents inflecting or real rent growth? And what do you think sort of a normalized net absorption is for the industry?

I'm just sort of wondering given we've seen a massive increase or I should say a decent pickup in vacancy. And I'm just trying to whether the inflection is this month or next year. I'm just trying to figure out how you think about the next two, three years given where vacancy is and do we actually see pricing power?

Yes. I think vacancy rate of 7.4% is pretty close to where you're going to see the peak in this cycle, absent some calamity. We may have another two or three quarters of bouncing around 10 basis points here or there. But I think you're essentially most of the way to where you're going to end up between the high threes where the trough was and the mid sevens, let's call it, where I think this is going to end up. As to when you really get pricing power is where that number comes down to around 5%.

That's historically been the magic number. By the way, 7.4% is almost the median vacancy rate since February. Just think about this. Putting aside COVID years with supercharged, what you may call it, e commerce absorption, it is seven four is a is a norm in this business, pretty much. In fact, to be precise, 44% of the time, the vacancy rate in the last twenty five years has exceeded 7.4%.

So we are just spoiled by having come out of an environment where we've seen high 3% vacancy rates and by the way high 3% unemployment rates. And now we're kind of really getting wigged out because unemployment is in the low fours and vacancy rates are in sevens. This is pretty normal. I think when we come down to 5%, it's we're to get really good pricing power above inflationary pricing power. And just figure that the market, I mean, Chris will walk you through our best guess.

But I kinda think of it as a as a business that grows at one and a half to 2%. So in a normal economy, when you don't have, you know, all kinds of noise coming out of different places, it should take a year or two for it to normalize to 5%, which is the equilibrium vacancy rate because we can predict deliveries pretty closely. So really the only variable is demand. And I don't know exactly what the demand numbers are going to be, but at some point they're going to center around the norm, which is about two fifty million feet. They're not going to go to three seventy five million it was during COVID because that was driven by a one time really big shift.

I think you heard me talk about it at that time. We got six years of growth in six months. We're still growing off of those higher numbers. But I can't think of another situation where we're to get six years of growth in six months. So mid-200s, a year or two, you're going to get pricing power. And when you do, it's going to be really above inflation in the short term because the pipeline hasn't started, construction costs have been going nuts, and I think they're going to continue to go up. So there you have it.

Thank you. Our next question comes from the line of Nick Thielman with Baird. Please proceed with your question.

Hey, good morning out there. Maybe just, Tim, question on bad debt. I think in June you referenced that that was trending better than expectations on that end. But maybe just an update here through 2Q just kind of with the macro uncertainty? And then anything you're seeing whether it be in the space size or the type of business where tenants are having a little bit of credit issues? Thanks.

Yes. That was relatively in line with the first quarter. It is elevated. We're probably bouncing between 35, 40 basis points where I think our history is closer to 20 or even a little below. The other reference point on all of that is the height that we've seen during the GFC, was up into the 50s.

I'll expect something on the order of 40% over the balance of the year as we still watch tenant health, which we are keeping a very close eye on. With regard to particular industries, I mean nothing that I would really build a thesis around. It's some larger customers at times. I feel like there's a little bit of a balance to Southern California, a little bit of a balance to larger users home oriented, but not enough to really break out into its own category.

I think the strong retailers are on the offensive. And I think probably in the retail sector, you've got the biggest difference between winners and losers. Winners are just taking share. One other thing about credit losses that's important to keep in mind, this is the first cycle I've seen where this is happening In that, the mark to markets have been so large that the defaults that we've had, every single one actually, I shouldn't say every single one, but in aggregate have been NPV positive, not negative. Because our opportunity to capture the higher market rent earlier than we thought makes up for more than the downtime that we experienced.

So yes, maybe a short term earnings impact, but it's not a value impact or even a long term earnings impact.

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

Great, thanks. Hamid, I thought your answer to Craig's question earlier was helpful. Hopefully, got this right, that you talked about the differential between those markets where tenants are comfortable and those that are choppy and how FOMO can change that very quickly. I guess, are there any specific geographical markets that you think could flip most significantly from being choppy to getting more competitive and maybe how quickly that could happen?

I think by Chris is gonna give you the names, but by definition, it's the markets that have strong long term fundamentals and have taken the biggest hit in the short term, I e, Southern California. Because a lot of people kinda like two quarters ago thought Southern California was gonna fall into the ocean and everybody was gonna go out of business. So there was very little FOMO, whatever the opposite of FOMO was. There was a lot of that. And I think once a couple of people started losing deals in Southern California and they see the stuff coming through the ports, ain't going to come from Kansas, I can tell you that.

It may not come from China, but it's going to come from somewhere else. I don't want to mean to pick on Kansas. But I think as soon as they see that, they lose a couple of deals. I think you'll see that market bounce because it's bouncing off of an exaggerated bottom. So by definition, that will be a big bounce.

Chris, do you want to add? I think maybe another part of this question is what are the really good markets today?

Yes. No, I'd underline the point that we see secular outperformance in these high barrier geographies and they can really move quickly. What are the outperforming? What are the underperforming geographies? Well, for sure international is the theme whether it's Europe, whether it's Latin America in particular the consumption centers there like a Mexico City and a Sao Paulo.

And then turning to The United States, we've had this Those being good. Those being good. Thank you. Yes. And we'll in some cases already are doing this hockey sticks for example in Brazil, favorable hockey stick.

In The United States, we still are going through this transition period, this sort of post pandemic normalization where the interior markets outperformed last year remains a trend this year. But what's changing are a couple of things. Number one, not all coastal markets are created equal. So SoCal is weak, but Southern Florida, Washington D. C.

Are examples of greater resilience. And then across some of The United States, we've seen better stability in the Midwest, so geography like Indianapolis had to contend with excess supply and it's working through it. And then across the Sunbelt, there's been some excess supply, but we're seeing those markets work through it as well. Dallas comes to mind. The leading submarkets there are really firming.

So you're starting to see transition across a range of markets.

I think Houston and Nashville are pretty strong.

Absolutely. Left those out. Houston, Nashville, Atlanta.

You. Our next question comes from the line of Mike Mueller with JPMorgan. Please proceed with your question.

Yes. Hi. I guess, sticking with markets, do you think any tariff dynamics will cause you to pivot back to some of the regional markets that you sold out of following the A and B merger?

Ever? Probably. But the one that we did come back to, I'm not sure was a great idea, to be perfectly frank with you, was Savannah. And we kinda got ended up back in there with the with the merger. It wasn't a conscious decision.

But we thought about it hard about whether we should stay in or not stay in, and we decided to stay in. And I think our earlier decision was actually the right one. I think it's not fundamentally a long term strong market. Notwithstanding, it's a very strong and well run port. But that's nothing.

I mean that's less than one tenth of percent of our business that I can think of that way. So I don't think so. We've been in and out of Tampa a couple of times. I think we're feeling better about Tampa these days than we did before. We've been in and out of Minneapolis a couple of times.

We're not going back in. Dan, what do you think?

No, I think we're in 31 markets in The United States. We're in 75 consumption centers globally. I think that accounts for about 78% of the world GDP in those markets. I think we're in the right markets and we're going stay focused there.

Thank you. Our next question comes from the line of Samir Khanal with Bank of America. Please proceed with your question.

Prologis (PLD) Q2 2025 Earnings Call Transcript

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