TLDR
- Core FFO per share reached $1.42, topping expectations.
- Occupancy rate stood at 95.2%, down 70 basis points from year-end.
- Net effective rent change surged 54% year-over-year.
- Power capacity for data centers expanded by 400 megawatts.
- Guidance for development starts trimmed amid market uncertainty.
Prologis Inc. (NYSE: PLD) kicked off 2025 with encouraging Q1 results. Core funds from operations (FFO) came in at $1.42 per share, or $1.43 excluding net promotes, reflecting consistent operational efficiency. Leasing activity remained resilient with 58 million square feet signed, supported by a 95.2% occupancy rate. Despite a 70 basis point dip from the end of 2024, occupancy was stronger than analysts expected.
The company also maintained steady same-store growth, with net effective rent increasing by 5.9% and cash growth reaching 6.2%. Rent changes on new and renewed leases hit 54% on a net effective basis and 32% in cash terms, underscoring Prologis’ strong pricing power.
As of writing, the stock is trading at $102.82 (2.53%)
Prologis Inc. (NYSE: PLD)
Lease Mark-to-Market and NOI Growth Potential
Prologis reported a 25% lease mark-to-market on a net effective basis, translating into an estimated $1.1 billion in incremental net operating income (NOI). This reflects the company’s strong positioning in key logistics hubs and the continued demand for prime industrial real estate.
However, the firm signaled caution regarding leasing activity, noting a 20% drop in volumes in recent weeks. While retention remained healthy, the decline could weigh on future occupancy and pricing if the slowdown persists.
Focus on Strategic Developments and Sustainability
In Q1, Prologis began $650 million in new developments, with nearly 80% being build-to-suit projects. While the pace of new starts has slowed, these tailored developments reinforce relationships with long-term tenants.
A key highlight this quarter was the expansion of Prologis’ data center power capacity by 400 megawatts, pushing its total to 2 gigawatts in the advanced-stage pipeline. This investment positions the company to benefit from rising demand for AI and cloud infrastructure.
Prologis is also pushing ahead with sustainability efforts. It now has over 900 megawatts of solar and battery storage capacity either in operation or under development. The company aims to hit 1 gigawatt by year-end, a move that could also offer utility-like income streams and boost long-term returns.
Capital Activity and Outlook
Prologis raised $400 million in capital for its flagship open-ended funds, which supports its liquidity position. It also issued $550 million in debt at a weighted average interest rate of 4.1%, locking in relatively favorable rates.
The firm received an upgrade from Moody’s to A2, reinforcing its balance sheet strength. Debt metrics remain conservative, helping to manage risk amid ongoing market volatility.
Still, the comp any lowered its 2025 development start guidance to $1.5–$2 billion, citing macroeconomic headwinds. General and administrative (G&A) expense guidance was raised to a range of $450–$470 million, reflecting inflationary pressures and rising labor costs.
Guidance Remains Firm Despite External Risks
Prologis reaffirmed its full-year Core FFO guidance at $5.65 to $5.81 per share including promotes, or $5.70 to $5.86 excluding them. This suggests management remains confident in the company’s leasing performance and capital allocation strategy, despite global trade tensions and reduced customer decision-making speed.
While uncertainty looms over capital markets and logistics chains, Prologis’ scale, balance sheet, and strategic focus on high-demand segments like data centers and sustainability give it a buffer against short-term turbulence.
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