Prologis lifts profit forecast as record leasing, data centers drive growth
Prologis raised its full-year earnings guidance for a second time after record lease signings and an expansion into data center construction signalled a new growth phase for the logistics real estate giant.
Prologis has lifted its full-year earnings forecast for a second time after posting second-quarter results that comfortably exceeded Wall Street expectations. The San Francisco-based logistics real estate investment trust signed a record 67 million square feet of new leases during the period, surpassing the previous high set just three months earlier.
Consolidated revenue reached $2.43 billion, an 11% increase from the same period last year and ahead of the $2.16 billion consensus estimate. Core funds from operations (FFO) came in at $1.63 per share, beating estimates by 8 cents and rising 17 cents year over year. Leases commenced grew 21% annually to 61.7 million square feet.
The results highlight a significant shift in the industrial landlord's business model. Average occupancy stood at 95%, up 10 basis points year over year, while net effective rent change on multiyear leases hit 36.9% for the quarter. Management is targeting 40% rent growth for full-year 2026, underscoring the pricing power currently embedded in the portfolio.
Executives signalled that the company's addressable market is expanding beyond traditional warehousing. "We believe the business is entering its next phase of growth," said CEO Dan Letter. "Customer demand is broadening, and our opportunity set is expanding as logistics, digital infrastructure and energy needs increasingly intersect."
This strategic shift is directly reflected in Prologis's updated capital deployment plans. The company now projects development starts between $4.5 billion and $5.5 billion, a $1 billion increase on both ends of the prior range. Crucially, this development pipeline includes new data center construction, a move that allows the firm to monetize its land holdings for digital infrastructure demand.
Core FFO guidance for the year was raised to a range of $6.22 to $6.30 per share, representing a 2% increase at the midpoint. The forecast assumes average occupancy of 95.25% to 95.75%, lifting the low end of the range by 25 basis points. "Embedded rent growth provides clear earnings visibility, and the scale of the opportunity ahead of us, together with our strong balance sheet, positions Prologis to deliver durable earnings growth and compound long-term value," said CFO Tim Arndt.
