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    PLD
    Earnings call· Sep 2025(Q3 FY25)

    Prologis, Inc. PLD

    Oct 15, 2025 Source

    Executive summary

    Prologis Q3 FY25 — Strong Leasing and Data Center Momentum

    Prologis delivered a strong Q3 FY25, marked by record leasing activity and an uptick in portfolio occupancy, signaling a market inflection. The company is actively exploring capitalization strategies for its rapidly expanding data center business, which now boasts 5.2 GW of power capacity. While market rents are bottoming, management expressed confidence in long-term rent growth potential and disciplined capital deployment.

    Highlights

    5

    • Record leasing quarter with 62 million square feet signed.

    • Portfolio occupancy grew 20 basis points to 95.3%.

    • Rent change of 49% net effective and 29% cash, highlighting a 19% lease mark-to-market.

    • Data center capacity in advanced stages reached 5.2 gigawatts, representing $15 billion in investment potential.

    • Development starts guidance increased to a range of $2.75 billion to $3.25 billion.

    Concerns

    3

    • Bad debt expense is elevated, expected to be in the 40s basis points on revenue for FY25.

    • Market rent declines, though slowing, were still just over 1% this quarter.

    • Southern California markets are expected to lag the broader inflection in operating conditions in the near term.

    Guidance & targets

    11
    CategoryTargetConfidence
    Average occupancy at our share
    95%
    medium materiality
    High
    Rent change
    low 50s
    medium materiality
    High
    Same-store NOI growth (net effective)
    4.25% to 4.75%
    high materiality
    High
    Same-store NOI growth (cash)
    4.75% to 5.25%
    high materiality
    High
    G&A
    $460 million to $470 million
    medium materiality
    High
    Strategic capital revenue
    $580 million to $590 million
    medium materiality
    High
    Development starts at our share
    $2.75 billion to $3.25 billion
    high materiality
    High
    Combined disposition and contribution
    $1.5 billion to $2.25 billion
    medium materiality
    High
    GAAP earnings
    $3.40 and $3.50 per share
    high materiality
    High
    Core FFO (including net promote expense)
    $5.78 and $5.81 per share
    high materiality
    High
    Core FFO (excluding net promote expense)
    $5.83 and $5.86 per share
    high materiality
    High

    Operational metrics

    15
    Core FFO (including net promote expense)
    $1.49ahead of forecast
    Q3 FY25

    Reported for the quarter.

    Core FFO (excluding net promote expense)
    $1.50ahead of forecast
    Q3 FY25

    Reported for the quarter.

    Net promote expense
    $0.01
    Q3 FY25

    Difference between core FFO including and excluding net promote expense.

    NOI capture from lease mark-to-market
    $75 million
    Q3 FY25

    NOI captured during the quarter from lease mark-to-market.

    Future NOI from lease mark-to-market
    $900 million
    future

    Additional NOI expected as leases roll.

    Solar generation and storage delivered
    28
    Q3 FY25

    Capacity delivered in the quarter by the energy business.

    Current solar capacity
    825
    Q3 FY25 end

    Total current capacity.

    In-place cost of debt
    3.2%
    Q3 FY25 end

    Average cost of debt across the portfolio.

    Average remaining life of debt
    8
    Q3 FY25 end

    Average remaining life of debt portfolio.

    E-commerce penetration of U.S. retail sales
    24%expanded since COVID
    current

    Secular driver of demand.

    Logistics development investment run rate
    $5 billion
    annual

    Rule of thumb for development investment in logistics.

    Logistics development contribution to growth
    150
    per annum

    Additional growth per annum from logistics development investment.

    Spec development lease-up time
    7 to 8 monthsextended by 1-1.5 months in '23-'24
    historical norm

    Slowly returning to historical norms.

    Development starts volume (FY24)
    lightest yearsince our merger
    FY24

    Impacts contributions at stabilization in 2026.

    Long-term earnings growth
    high single digits
    long-term

    Target for Prologis' earnings.

    Industry KPIs

    11
    MetricValueDetails
    Occupancy rate95.3%%
    Lease mark to market19%%
    Quarterly leasing volume62 millionsquare feet
    Leasing spread cash basis29%%
    Bad debt credit loss level40sbps
    Data center land bank pipeline5.2 gigawattsGW
    Market fundamentals rent growthjust over 1%%
    Leasing spread net effective basis49%%
    Investment cap rate stabilized yieldlow 5s%
    Development starts dollar value and mix$2.75 billion to $3.25 billionUSD
    Same store noi growth cash vs net effective3.9% (net effective) and 5.2% (cash)%

    Orderbook & backlog

    11
    Build-to-suit development pipeline$1.6 billionQ3 FY25

    Total expected investment from 21 deals signed year-to-date.

    Data center power capacity (secured or advanced stages)5.2 gigawattsQ3 FY25

    up 1.5 gigawatts from prior

    Includes 1.4 GW secured/under construction and 3.8 GW in advanced stages.

    Data center investment value (powered shell potential)$15 billionQ3 FY25

    Illustrative investment value based on 5.2 GW capacity.

    Data center investment value (turnkey potential)up to 4x $15 billionQ3 FY25

    Illustrative investment value if delivered in a turnkey format.

    Data center pipeline (deliverable capacity)every megawattQ3 FY25

    Every megawatt deliverable over the next 3 years is already in dialogue with customers.

    Land bank14,000 acresQ3 FY25

    Owned or controlled land bank.

    Build-to-suit new deals in conversationnearly 30 million square feetQ3 FY25

    Volume of new deals in active conversations.

    Solar capacity goal1 gigawattFY25

    On track to deliver by year-end.

    U.S. construction pipeline190 million square feetQ3 FY25

    Current under-construction pipeline in U.S. markets.

    U.S. net absorption (YTD)95 million square feetQ3 FY25

    Year-to-date net absorption in U.S. markets.

    U.S. net absorption (full-year expectation)125 million square feetFY25

    Expected full-year net absorption in U.S. markets.

    Deals & partnerships

    2
    VariousFinancing activity across REIT and funds$2.3 billion

    Closed $2.3 billion in financing activity during the quarter.

    VariousEUR bond raiseEUR 1 billion at 3.5%

    Successful EUR 1 billion raise at 3.5% coupon.

    Risks & headwinds

    4
    Elevated bad debt expenseFY25

    Expected to be in the 40s basis points on revenue for FY25, compared to an initial expectation in the 30s.

    Mitigation: Improved customer selection and credit health of the portfolio in prior cycles.

    Softer market rents in Southern CaliforniaNear term

    Rents remain soft.

    Mitigation: Expected to lag broader inflection but outperform over the long term.

    Interest rate sensitivityOngoing, into 2026

    Not quantified, but described as "anti-accretive to the bottom line".

    Mitigation: Long average remaining life in debt portfolio (over 8 years) moderates the impact.

    Deployment drag from light development starts in FY242026

    Contributions at stabilization (broadly in 2026) will be "nearly absent" or "quite low".

    Mitigation: Excitement about reinvesting capital into logistics and data centers in the future.

    What to watch in Q4 FY25

    5

    Data Center Capitalization Strategy

    Q4 FY25
    CurrentExploring additional capitalization strategies for its 5.2 GW data center pipeline.
    TargetSpecifics on new vehicles or funds for data center capitalization.

    Why it matters

    This will define how Prologis monetizes its significant data center land bank and power capacity, impacting future value creation and growth.

    We look forward to sharing more on this in the fourth quarter.

    Q&A highlights

    6

    What will the additional capitalization strategies for data centers look like (e.g., development fund, ownership comfort)?

    Dan Letter explained the current data center business strategy (build-to-suits with hyperscalers, strong pipeline, land bank advantage) and stated they are exploring the "art of the possible" for capitalization, with specifics to come in future quarters. Tim Arndt added that the balance sheet is capable of handling large project volumes in the interim.

    “We don't have any specifics to share with you now, but we hope to in the coming quarters.”

    asked by John Petersen · answered by Dan Letter

    2 min read6 chapters

    Detailed Narrative

    01

    Data Center Opportunity

    Prologis has amassed 5.2 gigawatts of power capacity for data centers, with 1.5 GW added this quarter, representing a potential $15 billion investment as powered shells or up to 4x that for turnkey delivery. The company is exploring additional capitalization strategies to fully leverage this opportunity, which combines real estate, power access, customer relationships, and capital. Demand for this product is exceptional, with every megawatt deliverable over the next three years already in dialogue with customers, indicating a significant value creation opportunity.

    02

    Market Inflection and Customer Sentiment

    Management observed a more positive tone, strengthening customer sentiment, and improved leasing velocity, suggesting the market has found its footing and is set for an inflection in occupancy and rent. Larger occupiers are pursuing network optimization strategies, with smaller and medium-sized enterprises expected to follow. E-commerce penetration, now 24% of U.S. retail sales, continues its march higher as a meaningful and secular driver of demand, with 52 unique names transacting this quarter.

    03

    Supply and Demand Dynamics

    U.S. market absorption was 47 million square feet for the third quarter, holding market vacancy steady at 7.5%, where it is expected to top out. The supply picture remains favorable as the construction pipeline depletes, and starts are below pre-COVID levels. Market rent declines have been slowing to just over 1% this quarter, further evidencing the market shift towards an inflection point, with demand improving and occupancy forming a base.

    04

    Global Portfolio Performance

    Prologis' global diversification continues to serve customers, with Latin America (Brazil and Mexico) delivering excellent results and the highest same-store growth in the portfolio. Europe has maintained higher occupancy and more moderate rent decline relative to the U.S., while the Japan portfolio maintains its track record of exceptional occupancy despite higher market supply in recent years. This global scale across 20 countries in dynamic markets is highlighted as a key strength.

    05

    Build-to-Suit and Energy Business

    Build-to-suit activity remains robust, with 21 deals signed year-to-date, amounting to $1.6 billion of total expected investment, and expected to represent over half of the full-year development volume. The energy business delivered 28 megawatts of solar generation and storage in Q3, contributing to 825 megawatts of current capacity, and is on track to meet its 1-gigawatt goal by year-end, driven by strong customer interest amid increasing energy prices.

    06

    Balance Sheet and Capital Strategy

    Prologis closed $2.3 billion in financing activity across the REIT and funds in Q3, including a successful EUR 1 billion raise at 3.5%. The company maintains an in-place cost of debt at 3.2% with more than 8 years of average remaining life, underscoring its global access to capital. The strategic capital business saw modest net inflows, with new vehicles drawing strong interest and positioning the company for the next phase of growth.

    AI-generated summary of the company’s earnings call. Not investment advice.