Prologis’ 2025 Earnings Call Contradictions: Data Center Growth, Power Constraints, and Unclear Rent Recovery Clash

Date of Call: Jan 21, 2026

Financials Results

• EPS: GAAP earnings guidance range of $3.70 to $4 per share

Guidance:

• Average occupancy forecast: 94.75% to 95.75% (includes seasonal drop in Q1).
• Net effective same-store growth forecast: 4.25% to 5.25%; cash same-store growth forecast: 5.75% to 6.75%.
• G&A forecast: $500 million to $520 million.
• Strategic capital revenue forecast: $650 million to $670 million.
• Development starts forecast: $4 billion to $5 billion (owned and managed), with ~40% expected to be data centers.
• Acquisitions forecast: $1 billion to $1.5 billion.
• Combined contribution and disposition activity forecast: $3.25 billion to $4.25 billion.
• Core FFO guidance (including net promote expense): $6 to $6.20 per share; (excluding): $6.05 to $6.25 per share.

Business Commentary:

Strong Fourth Quarter and Year-End Momentum:

• Prologis reported core FFO of $1.44 per share, finishing the year at the top end of guidance ranges.
• The company's performance was driven by disciplined execution, strong new leasing, and improved customer sentiment.

Occupancy and Market Conditions:

• Prologis achieved an average occupancy of 95.3% in Q4 and 95% for the full year, with a forecasted range of 94.75% to 95.75% for 2026.
• Improved net absorption and declining U.S. vacancy rates contributed to this strong occupancy performance.

Data Center and Power Development:

• Prologis expanded its power access to 5.7 gigawatts and has a pipeline of 1.2 gigawatts in LOI or advanced negotiations.
• The company's strategic focus on procuring power and securing build-to-suit lease transactions is driving growth in the data center business.

Strategic Capital and Vehicle Expansion:

• Prologis formed two new investment vehicles in the U.S. and China, with the IPO of the China AMC Prologis Logistics REIT.
• The expansion in strategic capital is aimed at diversifying the investor base and broadening access to capital in dynamic logistics markets.

Same-Store NOI Growth:

• Same-store NOI growth was 4.7% on a net effective basis and 5.7% on a cash basis in Q4, with a forecasted range of 4.25% to 5.25% for 2026.
• Growth is driven by rent change being the predominant component, supported by positive market conditions and strong customer relationships.

Sentiment Analysis:

Overall Tone: Positive

• Management stated they delivered a 'strong fourth quarter' and closed the year with 'solid financial and operational momentum.' They noted 'improved customer sentiment,' 'strong new leasing,' and that vacancy has 'peaked and rents are beginning to inflect.' The tone was confident, with statements like 'we enter 2026 from a position of strength' and 'we are extremely excited by the significant value creation opportunity ahead.'

Q&A:

• Question from Blaine Heck (Wells Fargo): Dan, can you speak about any changes in strategic initiatives that may come with your leadership at Prologis? And specifically, any thoughts around the strategic capital side of the business and when you might expect to add additional strategies, including a potential data center focused funds? Any information on the scope, potential timing and earnings impact would be really helpful.
  Response: The focus is on compounding the core logistics business, broadening the platform, and growing strategic capital AUM significantly through existing and new vehicles. On a data center fund, there is significant interest from large investors, and the process is meaningfully through; more news will be shared in coming months.

• Question from Michael Griffin (Evercore ISI): Tim, I appreciated your comments kind of walking through the puts and takes of your expectations in 2026. Wondering if you can dive a little bit deeper into your assumption around market rent growth and maybe if you're able to kind of quantify it for us in terms of what you're forecasting for the year ahead.
  Response: Net absorption is expected to approach 200 million sq ft in 2026, driving vacancy down to 7.1-7.2%. Positive rent growth in aggregate is expected to emerge more clearly over the course of the year.

• Question from Craig Mailman (Citigroup): Just want to hit on the data center piece real quick. I think, Tim, you said that you have 1.2 gigawatts in LOI or advanced negotiations. Can you just walk through kind of how many projects that would be? And how that's reflected in the development start guidance?
  Response: A small handful of data center starts are imminent. In the $4-5 billion owned and managed development start guidance, approximately 40% is expected to be data centers. There is opportunity for outperformance in both logistics and data centers based on project format and spec start environment.

• Question from Caitlin Burrows (Goldman Sachs): Maybe another data center question. So just a year ago on the 4Q '24 call, you guys mentioned that you could reach 10 gigawatts of power in 10 years. I guess now we're 1 year later and you're already at almost 6 gigawatts. So I was just wondering if there was any update on that kind of 10-gigawatt outlook or trajectory?
  Response: The 10-gigawatt figure represents the universe of opportunity. Management is comfortable with that number and will update as sites become energized.

• Question from Vikram Malhotra (Mizuho): I want to just clarify 2 things just based on your comments, which seem like we're moving from this bottoming to an inflection phase. So one, I guess it's been hard over the last 3 years to predict sort of this inflection in occupancy. So what gives you strength as you see this downtick in the first quarter to build a fair amount of occupancy to hit your guide?
  Response: Past years of low absorption are the outlier. The forecast for 2026 is for about a 25 basis point increase in average occupancy, finishing the year at 95.8%, which provides confidence.

• Question from Samir Khanal (BofA Securities): I guess, Tim, occupancy had a nice pickup in Europe and Asia in 4Q. I think you talked a little bit about Japan, but maybe can you provide some color on kind of the big pickup there in occupancy and sort of what's driving that?
  Response: Strong occupancies in Europe and Japan have been consistent for quite a while; momentum is building around the world ex-U.S., with healthy demand and lower vacancies.

• Question from Ronald Kamdem (Morgan Stanley): Just had a broader question on capital deployment, both on the data center and the traditional sort of industrial side. If you could just walk us through just what that potential pipeline looks like in terms of the ramp and what you need to see to sort of increase the run rate, specifically on the industrial side?
  Response: Significant opportunities exist globally across all size ranges. Development starts are made weekly based on market conditions; the company can ramp activity quickly.

• Question from Nicholas Thillman (Robert W. Baird): Maybe touching still on the development starts on the industrial side. Is it fair to assume that you still have a little bit more bias ex U.S. in that market? And then as we think of the land bank overall, you guys have alluded to the mark-to-market upside, but then replacement cost rents. I guess as we look at the bank -- land bank overall, what percentage of that bank do you think is in the money when it comes to new construction like [ barring ] -- or if the demand is there, like what percentage of that would you say is in the money at this point on new starts here?
  Response: Approximately 2/3 of 2026 logistics starts are expected to be in the U.S. The land bank is valued at about 110% fair market value to book value, but specific percentage of projects in the money is not disclosed.

• Question from Vince Tibone (Green Street Advisors): I have a few more questions on the data center opportunity. On the 1.2 gigawatts you mentioned are under LOI, would those be mostly powered shell or turnkey? I'm just trying to get a sense of the total investment for that power. And then could you also clarify just what exactly it means to be kind of in advanced stages of procurement for power?
  Response: The data center program is on the order of 60-70% powered shell with some for turnkey. Advanced stages mean a preliminary utility agreement is in place, signaling progress toward a firm power agreement, typically after 12-24 months of negotiations, with another 1-2 years to secure power delivery.

• Question from Michael Goldsmith (UBS): Despite what was a particularly volatile year in 2025, you still ended up at the high end of your initial core FFO like promote guidance, which suggests stability in the algorithm, but the spread for the outlook in 2026 is even wider. So is there anything that would add more sensitivity or a wider range of outcomes this year? And then as well, Southern California lease percentage picked up 140 basis points. So if you could touch on the health of that market, that would be appreciated.
  Response: The wider guidance range is natural math as FFO per share grows to a higher base ($6+). On Southern California, there is a tone shift with improving net absorption, earlier customer engagement, and pockets of scarcity leading to firming pricing; the cycle is progressing and short-term weakness is dissipating.

• Question from Michael Mueller (JPMorgan): Do your fund contribution expectations for '26 reflect just ongoing development activities for warehouses? Or does it factor in any contributions for the new vehicles?
  Response: Fund contribution guidance includes land contributions for the Agility Fund, marked up to fair value, before it begins its development activity.

• Question from Nicholas Yulico (Scotiabank): Tim, in terms of the guidance on same-store growth this year, I was hoping you could just unpack that a little bit in terms of the acceleration in same-store growth this year, is that just being driven by easier occupancy comps? Or are you also expecting some improvement in mark-to-market that you can capture?
  Response: Acceleration is driven by less occupancy drag and a decreasing contribution from rent change (lease mark-to-market), which was 50% in 2025 and is expected to be in the high 30s/40% in 2026. The Duke acquisition still drags growth by 75-100 bps.

• Question from Todd Thomas (KeyBanc Capital Markets): I wanted to go back to the capital deployment, ask about something at a little bit of a higher level. You previously talked about deployment drag in '26, just given lighter levels of starts in '24 and '25, which has impacted FFO growth to some extent in the near term. Can you talk about the cadence of stabilizations during the year and comment on whether you see that accelerating or increasing as the year progresses?
  Response: Speculative projects typically lease up in 7-9 months (longer recently), which may tighten as market conditions improve. Build-to-suits stabilize immediately at completion. Specific quarterly stabilization cadence is not provided.

• Question from Brendan Lynch (Barclays): Another follow-up on the data center side. Can you discuss the 5-plus gigawatts of power that you have access to and how fragmented that power is dispersed either geographically or even conceivably by asset and where the largest blocks are that you have?
  Response: Power access is distributed across Tier 1 and Tier 2 markets in the U.S. 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.

• Question from John Kim (BMO Capital Markets): I wanted to follow up on what's incorporated in same-store guidance in terms of the occupancy growth of U.S. versus international markets? Will that international outperformance continue? And also what you're expecting from solar contribution, given there wasn't much contribution last year, but we're 1 year closer to $1 billion Essentials revenue target that you're expecting by 2030?
  Response: Occupancy gains in same-store are dispersed across geographies, with more weight from the U.S. but uniform improvement in basis points. Solar revenue is in NOI; while the 1-gigawatt goal is surpassed, its growth is nominal compared to rental operations, but it will become a more meaningful contributor in future years.

Contradiction Point 1

Market Rent Growth Timeline & Clarity

Contradiction on when rent growth will become clear and stabilize.

Could you clarify your assumptions for 2026 market rent growth, specifically if they account for a decline in the first half and improvement in the second half? - Michael Griffin (Evercore ISI)

2025Q4: Positive rent growth in aggregate is expected to become clearer throughout the year as market conditions progress. - Christopher Caton(Managing Director)

Is your view of 2027 market rent growth still valid given the press release's comments on logistics rent and occupancy, and what is the timeline for rent growth? - Caitlin Burrows (Goldman Sachs)

2025Q3: Rent growth will be a product of the evolving supply/demand balance and the macro environment... The exact timeline (6 months vs. 2 years) for the catch-up to that higher trend line is uncertain. - Hamid Moghadam(CEO)

Contradiction Point 2

Data Center Value Creation Growth Contribution

Contradiction on how data center returns are benchmarked against the core logistics business.

How many projects are included in the 1.2 gigawatts in LOI/advanced negotiations, how does this relate to the development start guidance, and how much of the start guidance is allocated to data centers versus warehouses? - Craig Mailman (Citigroup)

2025Q4: The 2026 owned & managed development start guidance of $4-5B includes ~40% from data centers. - Timothy Arndt(CFO)

How do you compare the normalized growth rate of data centers versus industrial sectors from an ownership perspective? - Nicholas Joseph / Craig Mailman (Citigroup)

2025Q3: The contribution to growth from data center value creation (if sold and proceeds reinvested) can be benchmarked to the core logistics development portfolio... A similar value creation concept from data centers would have a comparable effect. - Timothy Arndt(CFO)

Contradiction Point 3

Data Center Development Start Capacity & Constraint

Contradiction on whether capital or power is the primary constraint for scaling data center starts.

How many projects does the 1.2 gigawatts in LOI or advanced negotiations represent, and how does it relate to the development start guidance? Also, what percentage of the start guidance is allocated to data centers versus warehouses? - Craig Mailman (Citigroup)

2025Q4: A 'small handful' of data center starts are imminent... The 2026 owned & managed development start guidance of $4-5B includes ~40% from data centers. - Timothy Arndt(CFO)

What is the realistic pace of data center starts considering the large land bank and secured power, and what constraints limit achieving $3+ billion in annual starts? - Vince Tibone (Green Street Advisors)

2025Q3: There is no apparent capital constraint. The balance sheet has ample liquidity and debt capacity. Power availability will be the constraint going forward, not capital. - Timothy Arndt(CFO) and Dan Letter(CEO)

Contradiction Point 4

Development Start Composition & Geography

Contradiction on the proportion of data center vs. logistics starts and the geographic focus for spec starts.

How many projects correspond to the 1.2 gigawatts in LOI/advanced negotiations, and how does this relate to the development start guidance? What portion of the start guidance is allocated to data centers versus warehouses? - Craig Mailman (Citigroup)

2025Q4: The 2026 owned & managed development start guidance of $4-5B includes ~40% from data centers. The logistics portion... is still below a strong run rate... For 2026 logistics starts, about 2/3 are expected to be in the U.S. - Timothy Arndt(CFO), Dan Letter(CEO)

What impact has Liberation Day had on the leasing pipeline and how does that influence the decision to increase development starts and acquisitions? - Ronald Kamdem (Morgan Stanley)

2025Q2: The $1 billion increase in development start guidance includes a $300 million data center start in Austin, Texas. The remainder is split roughly half build-to-suit and half spec. Future starts... with spec starts primarily outside the U.S. - Christopher Caton(CFO), Dan Letter(CEO)

Contradiction Point 5

Occupancy Forecast Cadence

Contradiction on the expected trajectory and stability of occupancy levels.

What factors support confidence in the occupancy forecast despite past volatility, and what limits FFO growth in 2026 despite strong core growth? - Vikram Malhotra (Mizuho)

2025Q4: The 2026 forecast for average occupancy (94.75%-95.75%) includes a ~25 bps sequential increase, finishing the year at 95.8%, which is supported by the momentum in demand. - Timothy Arndt(CFO)

What caused the unexpected Q1 spot occupancy decline, and what is your updated outlook for the remainder of the year? - Steve Sakwa (Evercore ISI)

2025Q1: In the stress test scenario (GFC-level downturn), the company assumes the occupancy decline will be greater and sustained through the end of the year rather than rebuilding as previously expected. - Timothy Arndt(CFO)