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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 4th Quarter 2024 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.

Thanks, Shamali, and good morning, everyone. Welcome to our 4th quarter 2024 earnings conference call. The supplemental document is available on our website at prologis.com under Investor Relations. I'd like to state that this 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 statement notice in our 10 ks and other SEC filings. Additionally, our Q4 earnings 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 Arch, our CFO, who will cover results, real time market conditions and guidance.

Amit Moghaddam, our CEO Dan Letter, President and Chris Caton, Managing Director, are also with us today. With that, I'll hand the call over to Tim.

Thanks, Justin. Good morning, everybody, and thank you for joining our call. I'd like to begin by recognizing the devastating wildfires still affecting Los Angeles. We operate a large portfolio there, but more importantly, we have colleagues, customers and their communities struggling with the aftermath. It's too early to predict the full ramifications, but we'll continue to support the response and stay connected with local and state leaders as well as service organizations as the region works to recover.

We have no doubt that a vibrant and dynamic Los Angeles will emerge from this crisis even stronger. In our business, the bottoming process across our markets continues to progress. Leasing in our portfolio accelerated following the U. S. Election and the pipeline has started the year at healthy levels.

During the quarter, we signed more than 60,000,000 square feet of leases, a company record and saw interest diversify across customer profile, size requirements and markets. Looking ahead, we believe market vacancy is topping out and rents will inflect later this year. Turning to our results. Core FFO excluding net promote income was $1.42 per share and including net promotes was $1.50 per share. Our full year results ended at the top end of our guidance range and in the end represent 8.4% growth over 2023, putting us in the 86th percentile of all REITs.

Average occupancy was 95.8 percent for the quarter, 96.3 percent for the year. Net effective rent change during the quarter was 66% and on a full year basis was 69%, activity which added over $340,000,000 in annualized NOI. Our net effective lease mark to market finished the year at 30% and represents a further $1,400,000,000 of incremental NOI. And finally, net effective and cash same store growth during the quarter were 6.6% and 6.7%, respectively. In terms of capital recycling, we had another active quarter.

Importantly, we contributed $2,000,000,000 of assets to our Strategic Capital Ventures, bringing the full year total to over $3,300,000,000 While capital flows in 2024 remain challenging, we did raise over $1,700,000,000 across the platform, driving the growth in 3rd party AUM by over 7%. We disposed of over $900,000,000 of assets in the quarter and acquired approximately $450,000,000 And stepping back over the full year, we disposed of over $2,100,000,000 and reinvested into a similar $2,300,000,000 of acquisitions at a positive IRR spread of 170 basis points, demonstrating our ability to self fund and earn a return regardless of the yield environment. Included in our disposition activity for the quarter was the sale of our Elk Grove data center in Chicago. Elk Grove was a logistics asset that we converted to a powered shell before securing a build to suit turnkey transaction with a hyperscaler last fall. We simultaneously identified a buyer and closed in the 4th quarter at very attractive economics.

Because the property was owned by USLF and for our structuring, procurement, leasing and monetization efforts, Prologis earned a value creation fee of $112,000,000 which was not included in our prior guidance due to the uncertainty and the timing of the transaction. Elk Grove is a great showcase of our data center development capabilities, which are more comprehensive than most. Today, we have 1.4 gigawatts of secured power and 1.6 gigawatts in advanced stages of procurement. Over the next 10 years, we see 10 gigawatts of development potential across our portfolio. As a platform, we have the team, customer relationships, development and energy expertise, advanced procurement capabilities and the capital required to create significant value for our shareholders.

Turning to market conditions. As mentioned, quantitative measures of the market such as vacancy and changes in market rent met our expectations. More importantly, indicators in our pipeline and dialogue with customers have us encouraged that conditions are set for recovery in net absorption, leading to a bottoming in global rents. It's worth highlighting that our non U. S.

Portfolio fared better in rent growth over 2024, particularly in places like Japan, the U. K, Southern Europe and Latin America, which all grew over the year. Customer engagement is improving and we saw a notable increase in activity amongst our larger global customers who often lead in the recovery of demand as we've seen in past cycles. The improvement in decision making is reflected in our proprietary metrics where proposals increased earlier in the year, lingered for a period of time and then began converting more meaningfully after the election. That leasing pattern translated to elevated gestation also seen in our metrics.

Our 'twenty five forecast for net absorption calls for approximately 20% improvement over 2024, gradually building over the year. We also know that completions will decline significantly contributing to a supply forecast that is approximately 35% below 24%. As such, we expect a decline in vacancy over the year, which will pave the way for rent growth. Longer term, we continue to see the path for uplift from market rents to replacement cost rents, a dynamic that will build upon our already significant lease mark to market. Today, we see replacement costs as 50% higher than in place rents.

The capital markets were active with 4th quarter transaction volumes that put the year in total back to pre COVID levels. Unlevered IRRs have compressed to the mid-seven percent range and valuations as reported in our 3rd party appraisals had the globe marginally up this quarter. Capital raising in our open end vehicles was more muted in the 4th quarter as investors paused to take in changes in the yield environment, but we remain confident in our expectation for growing capital raises in 2025 as the pipeline is solid and conversations are active. Terms of guidance, which I'll review at our share, we are forecasting average occupancy to range between 94.5% 95.5%, which contemplates a dip in occupancy over the next 1 to 2 quarters, some of which is seasonal before rebuilding closer to 96% by the end of the year. Net effective same store growth is forecasted to be in a range of 3.5% to 4.5% and cash in a range of 4% to 5%, each driven by still significant rent change.

Our G and A forecast is for $440,000,000 to $460,000,000 and our strategic capital revenue forecast calls for $560,000,000 to $580,000,000 As for deployment, we are forecasting development starts to range between $2,250,000,000 $2,750,000,000 We will continue to be selective in our starts and clearly have a lot of capacity to grow this number as conditions, rents and returns warrant. As a reminder, data center starts are excluded from this guidance given their lumpiness. That said, we do expect new projects to begin in 2025, likely in a range of 200 megawatts to 400 megawatts. Acquisitions will range between $750,000,000 1,250,000,000 dollars and our combined contribution and disposition activity will range between $2,500,000,000 $3,500,000,000 Our development portfolio now stands at $4,700,000,000 with estimated value creation of 1,100,000,000 dollars 450,000,000 to 600,000,000 of which we expect to realize this year. Finally, 2025 will be an important year for our Energy business where our forecast is to hit our 1 gigawatt goal for solar generation and storage by year end.

In total, we are establishing our initial GAAP earnings guidance in a range of $3.45 to $3.70 per share. Core FFO, including net promoter expense, will range between $5.65 $5.81 per share, while core FFO excluding net promoter expense will range between $5.70 $5.86 per share. In closing, we navigated a challenging year in terms of an operating environment clearly unwinding from the overbuilding of the COVID era. Our ability to generate over 8% growth in such an environment is a testament to the resiliency and breadth of our company. We're pleased with the increase in activity and improvement in sentiment that we've seen so far in the last 2 months And working through gray space amid the favorable supply backdrop will further establish the foundation to build occupancy, grow rents and increase values, unlocking the full earnings potential in our core business.

And finally, we're very excited with what the future holds for our data center and energy initiatives. With that, I'll turn the call over to the operator for your questions. Operator?

Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Ki Bin Kim with Truist Securities. Please proceed with your question.

Thank you. Good morning, everyone. Can we flush out the 2025 guidance a little further, please? And maybe you can touch on items like lease spreads, bad debt that you're assuming? And on the occupancy front, the 95%, which is a little bit lower, I'm curious how much of that is same store versus, let's say, development leasing or development projects coming into the pipeline that might not be leased up for some time period?

Hey, Ketan. It's Tim. So on rent spreads, we're going to see them in the 50% range this year, 5 handle over the course of this year still quite elevated from that lease mark to market even with market rent growth a bit slower in the last several quarters. Bad debt, we normally are expecting something on the order of 20 basis points. Our history has been a little bit better than that.

Our forecast is allowing for between 20 30 in this coming year as we enter the year with a few known tenants that we're watching, but we'll see that normalize hopefully by the end of next year. And then in terms of occupancy, it's the 2 pools are so large, the average occupancy and ending occupancy that we're expecting broadly for the company are not very different than what we'll see in the same store pool.

Thank you, Ki Bin. Operator, next question?

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

Good afternoon, everyone. Hey, Tim, you guys made some positive comments around leasing. But when I look at the space utilization chart, it was a bit surprising that slipped from the last quarter. Maybe reconcile the trends you're seeing there with some of the comments you're talking positivity around leasing, inflection, etcetera. Thanks.

Hey, Sameer, it's Chris Caton. I'm going to take it. Thanks for the question. Good to hear from you. So at the end of the day, we think there's some good news in this data and let me unpack that for you.

As you look at the course of that material, that data over the year, utilization was largely range bound in the low 84% range, and we do think a more typical level is 85% or higher. Now recall, over the course of 2024 and in particular in December, but consumption growth and holiday sales were unexpectedly healthy and that pulled goods out of the supply chain. And it led to this dip in utilization that is not really representative of the true trend. Customers instead are telling us that their utilization is rising, and we're starting to hear reports of inventory building taking shape in 2025.

Thank you, Sameer. Operator, next question?

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

Good morning. Thanks for taking the question. So just on market rent growth, do you mind, a, just giving us what the actual realized market rent growth was across sort of the U. S. Versus other regions, maybe even just coastal, non coastal?

And then the same view, if you can give your updated forecast for 25 or just the 12 month rolling number you gave? Thanks.

Hey, Vikram, Chris, Ketan. Thank you for the question. So we had rents decline roughly 2% in the quarter. And yes, there was a differential between coastal and non coastal, although it had narrowed in the Q4. As it relates to 2025, Tim described an outlook.

Look, most markets are stable, but we expect modest further decline from here in a handful of soft submarkets. Later this year, we expect an inflection and positive growth to emerge. Now how that puts comes together for a view on 2025? There are scenarios where rents are flat, down or up. And we're calling an inflection point within a single 12 month window is difficult and we do not want to offer that sort of sense of false precision.

This is Dan. Let me pile in on that. One thing to keep in mind is it's a point I made on the call last quarter is 90% of our leases actually roll beyond the next 12 months. So to his point on whether rents fluctuate up or down to two points throughout the year, it's not going to impact the long term earnings for this company or the value of the business. And as Tim mentioned in the script, replacement cost rents are actually 15% higher than market rents and that's 50% higher than in place rents.

And it's the gap between the market rents and replacement cost rents that are really going to be the ultimate driver of rent growth into the future.

Thank you, Vikram. Operator, next question?

Thank you. Our next question comes from the line of Ronald Kamden with Morgan Stanley. Please proceed with your question.

Hey, just going back to the dev starts, obviously picked up this year versus last year. I guess I'm curious if you're thinking about commentary of leasing accelerating positive absorption, what do you need to see for us to see that number start to ramp back up to the $4,000,000,000 to $5,000,000,000 ZIP Code? And do you think you could see it this year?

Yes. Thanks, Ron. What I would say is our starts last year, we deliberately slowed those starts. We continue a very disciplined approach to our spec program. We also saw a number of very large build to suits push into 2025.

So what are we looking at right now? We're looking at the market conditions improving. So we do expect completions to come way down. We've they're actually down 70% from the peak. Excuse me, starts are down 70% from the peak as well.

So the market itself is heading in the right direction. And then we're waiting for that rent to improve for the returns to improve. One thing to keep in mind is what we do have $5,000,000,000 under development right now and 30,000,000 square feet. We do have this very large land portfolio with $41,500,000,000 worth of opportunities and that's in literally hundreds of sites around the globe. And we've been making infrastructure investments, site work investments, so we can really narrow the vertical build time and flip the switch when the time is right.

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 question. You stated in your prepared remarks, leasing in your portfolio accelerated following the U. S. Election and the pipeline that started the year at healthy levels.

Are you able to frame the magnitude of improvement? And from your conversation with tenants, what is driving that improvement? Is it more certainty? Is it more willingness to spend? Is it the deals that were dying on the CFO's desks are now getting put through?

Any helpful commentary there would be helpful. Thanks.

Yes, Michael. I'll start on this and maybe Tim or Chris will pile in. What we saw last quarter was really kind of a tale of 2 different markets. The first part of the quarter, 1st 5, 6 weeks, it was very quiet. And we did hear from customers.

They're waiting to see what was going to happen with the election. That was coming off 5, 6 quarters of delay in decision making due to cost of capital or geopolitical concerns. And then post election, it really was this boom that we've had really 10 weeks of very solid decision making and it's unlocking previously stalled deals. So we're seeing resiliency from e commerce, general goods, electronics, food and beverage, really it's pretty broad based where we're seeing this activity and what we're hearing from these customers. We're also hearing from these customers.

We still have a group of customers saying that they're working through gray space, they're focused on cost containment. But then I'll tell you 3PLs last quarter broke the record that they had in the Q3 of 25,000,000 square feet of leasing. So 3PLs in the back half of the year at least nearly 50,000,000 feet. So kind of a tale of 2 markets and some really robust leasing from several customer segments.

Yes. Just in terms of the specific quantification, Tim already discussed record lease signings. And in terms of a pipeline, the pipeline is up 17% January to January, specific response to your question.

Yes. The only thing I would add is that actually the end of the Q4 and the beginning of the Q1 are usually slow times. So I think that the bump was even more important or different than history.

Thank you, Michael. Operator, next question.

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

Hey, good afternoon, guys. Just on the occupancy piece, just a few follow ups. Tim, maybe you mentioned a couple of tenants that you're monitoring for bad debt and then you also mentioned seasonality. Could you frame up within that range of 100 basis points of 94.5% to 95.5%, how much of that sort of seasonality driven versus how much of it is potential bad debt that may not materialize? And then that was helpful on the pipeline update.

But I'm just kind of curious here also how you guys are managing the portfolio with an expected market rent inflection potentially by the end of the year? Are you guys prioritizing occupancy over rate at this point to kind of firm

up the portfolio? Or are you holding back

at all, kind of holding on price? I'm just kind of curious how much toggle there is in that OXY guide on kind of what you know versus how you're managing the portfolio?

Hey, Greg. Let me start by unpacking it this way. As we look at our outperformance to market on occupancy historically, and I'm talking maybe 10, 15 years now, we have a history of outperforming the market, maybe 100, 150 basis points. And I would just put a side note on that that over that period of time the portfolio has been improving greatly and we expect that outperformance will grow. And in fact in the recent quarters it has or even years now we've seen that outperformance level nearly double.

If you put the elements of our forecast together with not only for our own portfolio, but also what we see in the market, we think we're actually going to see this level of outperformance that we have today, which sits in the high 200 basis points, probably where we end the year. What we do see is that in our own portfolio, just again circumstances to particular leases that our average will be a little bit lower. So what my point here is, you can almost describe that difference that you observe in average occupancy to those rolling leases that are going to take a little bit of time to backfill. But we do think we'll rebuild that overall outperformance level by the end of the year. And then in terms of managing for rent growth or occupancy, as you can imagine, it's not just a market or submarket conversations even down to the lease level, given our revenue management capabilities and we have a lot of markets and submarkets at different stages of recovery.

Yes. The only thing I would add to that is that credit loss averaging under 20 basis points across the cycle. The highest it got was in the global financial crisis, which was crazy. It was almost 100 basis points. But even in the beginning of COVID, when the world was in a panic, it got to 50, 60 basis points and then went right back down.

So the credit loss issue is never going to be the big I shouldn't say never, but it hasn't been a big explanation for that change. And one other thing, we actually track a statistic, which is the value pickup on credit loss. And because there's such a big mark to market on anything that we lose to credit loss, we need to lease it within the next 15 months before we are worse off. In other words, if the space remains empty for less than 15 months, given the mark to market, we actually make money on that space. Sure, it's a short term earnings impact, but it's actually a long term value driver.

Thank you, Craig. Operator, next question.

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

Hi, everyone. Maybe for a while now, it has seemed like the new leasing was a tougher part of the business, but that renewals were doing well, so high retention, maybe slightly less price sensitivity. How would you describe that renewal business now? Is there anything changing in the trends that you've noticed? And when leases come up for renewal, are tenants staying?

Hey, Caitlin, Chris, Ketan, thanks for the question. When we look at our pipeline, we still have many of our customers interested in renewing and that trend continues. But there are more new requirements coming to the market, customers looking to grow. And so we also have seen an expansion in our new leasing pipeline. So both things can happen at once.

Hey, Caitlin, customers move because they may need more space or they may need less space or they may need space in a different location. And oftentimes, that actually occurs within our portfolio. But when you're sort of 95% leased, the options are limited in the portfolio. So sometimes we lose them for that reason. But the preference of most customers in a stable environment is to renew.

Thank you, Caitlin. Operator, next question.

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

Thanks. Just turning back to the guidance, I guess, Tim, I was wondering if there's any way you could quantify a little bit more some of the impact on what feels like it's going to be lower development NOI from stabilizations this year versus last year? I mean, you do have the stabilizations and guidance at $2,500,000,000 Last year, it was over $4,000,000,000 So I imagine there's some NOI drag there and then also if there's also a capitalized interest issue to think about. And I guess with the starts also having now picked up and planning for this year, is 2025 sort of at a worse point in terms of that year over year delta on how like development might be weighing on FFO growth this year? Thanks.

Yes. Thanks, Nick. Look, you've got the right elements of course. And the way I might even examine this question, if we look at same store in 24 compared to bottom line earnings and then do the same embedded in our guidance for 25 that pardon me, that delta between the top line and the bottom line is apparent. It's due to the factors you described, I would throw in that interest rates as well, even though nominally when we move from 3.0 percent to 3.2 percent interest, don't sound like much, but on a percentage basis, that's a driver.

The development start volumes being a little bit low to our capacity is starting to be seen as well. What I feel good about is that all the things we're describing here are normalizing in some cases below trend in others, but are going to reset themselves to a new foundation for growth from here, which we're very confident is going to be back up in the levels that we've seen this company historically provide.

Thank you, Nick. Operator, next question.

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

Hi, good morning. Could you discuss rent trends at the market level in a little more detail? Specifically, could you provide how much rents increased during 2024 in your better markets and how much they fell in 2024 in your weaker markets?

Vince, Chris Ketan here. So I think I'd start by saying, let's not go market by market, detail by detail. We're a large global international business, but a couple of touchstones that we've had that I think are worth coming back to. So number 1, if it's not clear, it should be that international markets outperform the domestic markets. Tim enumerated them on the in his script, but whether it's Japan, whether it's Europe broadly and in particular some of the geographies there as well as Latin America, that was a clear outperform.

And then within the U. S, really talked about this dynamic of Southern California and the rest of the business. In Southern California, we had rents down 25% on a net basis. So a meaningful reset in rates there. And so then by contrast, when you look at sort of U.

SoCal, it was only down modestly in the year.

Yes. And the best performing markets would be in single digits up and the worst performing markets other than SoCal would be in single digits down. And just while we're in the subject of SoCal, just there are 2 issues that I think the market is not focused on. 1 is this whole discussion about immigration and its impact on labor supply and the impact of that on construction costs. And secondly, the pressure that the rebuilding efforts are going to put on material supplies and labor.

I think all of those things are going to drive replacement costs significantly higher. And so that spread that you've heard us talk about the 50%, I would bet that that spread is going to widen significantly.

Thank you, Vince. Operator, next question.

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

Great, thanks. Can you give an update on your overall mark to market throughout the portfolio? And secondly, I guess how should we think about the cadence of same store NOI throughout 2025? You're coming off the 4th quarter at 6.7% cash same store NOI. So should we expect it to gradually come down throughout 'twenty five and end the year somewhere below that 4.5 percent cash midpoint?

Or is there more nuance and seasonality in the forecast given that you mentioned, I think that occupancy would build back up towards the end of the year. Any commentary there would be helpful.

Hey, Blaine, it's Tim. For the first part on the lease mark to market, I described that it's about 30% at the end of 'twenty four. We really don't break that out for you in very significant geographic detail. You can certainly take it away that it broadly is representing the United States and you know that the state of rents in places like SoCal. So I'll leave it to you to unpack from there.

In terms of the cadence of same store growth, I would I think rent change is going to be relatively level over the quarters for that part of it. So it's really going to be a function of what's going on in occupancy. And I described that we think the next coming quarters we'll see a little bit of give back in occupancy is our expectation. I hope to outperform that, but that's followed by a rebuild. So you would see some lower same store potentially in the front half and then it would grow in the second half.

Thank you, Blaine. Operator, next question?

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

Thanks and good afternoon everybody. Tim, if memory serves me, you previously talked about I think $7,000,000,000 to $8,000,000,000 of data center spend over the next 5 years. I think you mentioned 10 gigawatts of data center opportunities in your prepared remarks, which is likely above the top end of that previous range. Are we thinking of that correctly? And if so, what are your thoughts on data center spend as we look out over the next 3 to 5 years for Prologis?

Hey, Tom. This is Dan. I'll take that one. So yes, that's you're thinking about this correctly. You should think about 10 gigawatts over the next 10 years.

We've built internal capabilities over the last year, year and a half, and we've been just getting deeper in our pipeline and have a lot more confidence in the numbers that you've heard. Like we said, we've got 1.4 gigawatts secured power. We've got 1.6 in the advanced stages of procurement. We've got another 1.5 gigawatts of applications that are right behind that. But all in, it's 10 gigawatts over the next 10 years.

And that doesn't even touch upon the universe of opportunities. This is coming from a portfolio of 6,000 buildings and 15,000 acres of land that we own or control. So the universe of opportunities is much greater than that. Tim?

Yes, I'll just come back to maybe what was also underneath your question there on the sheer amount of spend and you see this quarter Elk Grove as I mentioned a great example of the playbook that we have at the moment is to recycle and monetize back out of these assets. That may take a different form over time, but the point is we will free up capital. We have an internal risk budget set up for this business that is sufficient for the team to execute.

Yes, one other thing, it's always not easy to translate megawatts into dollars because for example, outgrowth started out being a power shell and ended up being a turnkey. So that will maybe increase the capital spend by a factor of 2. So we're more comfortable projecting megawatts than dollars, but regardless we can handle it.

Prologis (PLD) Q4 2024 Earnings Call Transcript

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