Prologis (NYSE:PLD) executives highlighted what they described as strong fourth-quarter execution and improving operating trends during the company’s fourth-quarter 2025 earnings call, pointing to higher leasing volumes, resilient occupancy, and early signs of a broader market inflection as the industrial real estate cycle improves. Management also spent significant time discussing growth initiatives in data centers, energy, and strategic capital.
Fourth-quarter performance and portfolio fundamentals
CEO Dan Letter said the company closed the year with “solid financial and operational momentum,” crediting disciplined execution and customer engagement across markets. CFO Tim Arndt reported that Prologis signed 57 million square feet of leases in the quarter and “drove occupancy toward 96%,” which he said further widened the company’s outperformance versus the market.
On an own-and-manage basis, average occupancy was 95.3% for the quarter and 95% for the full year, with period-end occupancy at 95.8%. Arndt attributed results to strong new leasing and retention of 78%. In the U.S., he said Prologis expanded its outperformance versus the broader market to 300 basis points.
Arndt said net effective rent change was 44% for the quarter, contributing about $60 million of annualized NOI, and bringing net effective rent change for the year to more than 50%. He added that net effective lease mark-to-market ended at 18%, representing nearly $800 million of embedded NOI “yet to be realized without any increase in market rents.”
Same-store NOI growth in the quarter was 4.7% on a net effective basis and 5.7% on a cash basis, each ahead of the midpoint of guidance. For the full year, net effective same-store growth was 4.8%, which Arndt said hit the top end of the company’s range.
Market conditions: demand improving and rents nearing an inflection
Management said improving customer sentiment and better-than-expected market conditions supported its view that vacancy has peaked and rents are beginning to inflect across many markets.
Chris Caton, managing director, provided a 2026 outlook for U.S. fundamentals, saying vacancies are “poised to improve over the course of the year.” He noted that in the fourth quarter, net absorption outperformed completions, and he expects 2026 to “play out the same way.” Caton said the company expects net absorption to approach 200 million square feet in 2026 versus 155 million last year, while deliveries are projected at roughly 180 to 185 million square feet in 2026, down from 200 million last year. He said this would take U.S. vacancy, which ended 2025 at 7.4%, toward 7.1% to 7.2% by the end of 2026.
Arndt also pointed to U.S. fourth-quarter net absorption of 59 million square feet and said completions were exceeded for the first time since 2022. He added that market rents declined at their slowest rate since 2023, with many markets posting positive growth.
On customer behavior, Arndt said conversations have become “increasingly forward-looking.” While uncertainty such as tariff policy remains a consideration, he said it is now being treated more as a planning assumption than an impediment. He also said e-commerce represented about 20% of the company’s new leasing activity over the last year, making 2025 its best year since 2021.
Capital deployment, development, and energy progress
During the quarter, Prologis sold approximately $900 million of “value-maximized assets” and acquired $625 million, which Arndt said were purchased at attractive discounts to replacement cost. He said the combination generated a positive 150-basis-point spread in expected IRR.
Development starts totaled $1.1 billion in the quarter, all logistics projects, with more than 48% build-to-suit. For the full year, starts totaled $3.1 billion, with build-to-suits representing 61%. Arndt said this reflected a strategy of matching “well-located and titled land” with customer demand to generate attractive returns despite the de-risked nature of projects.
In the company’s energy business, Arndt said Prologis lifted total installed capacity to 1.1 gigawatts, surpassing a 1-gigawatt goal set four years ago. He said additional capacity will be added given “significant untapped potential” across the portfolio, while also noting later in the Q&A that solar revenue is still nominal relative to the company’s rental NOI base but expected to grow into a more meaningful contributor over time.
Strategic capital expands, including a new China listed vehicle
Arndt highlighted two strategic capital milestones. First, Prologis completed the IPO of the China AMC Prologis Logistics REIT (C-REIT) on the Shenzhen Stock Exchange, which he said is the company’s third publicly listed vehicle alongside NPR in Japan and FIBRA Prologis in Mexico. Second, the company added a new vehicle focused on development, redevelopment, and value-add strategies, complementing existing open-ended funds focused on stabilized assets.
Arndt said Prologis held the anchor closing for the U.S. Agility Fund during the fourth quarter. Later, he clarified that 2026 contribution guidance reflects the expectation that the Agility Fund will take land contributions from Prologis, marked up to fair value, before beginning some development activity.
In response to an analyst question about a potential data center-focused fund, Arndt said the company has been in discussions with large global investors interested in co-investing and that capital “isn’t necessarily the constraint.” He said management is evaluating what capital structure makes sense to fully pursue development opportunities while growing AUM and fee streams, and expects to know more in the “coming weeks and months,” while emphasizing the company is taking care to “get right” given the opportunity’s scale.
Data centers: power pipeline growth and leasing discussions
Management said data centers represent a high-return adjacent business where Prologis’ land, power access, and customer relationships provide an edge. Arndt said the company expanded power access to 5.7 gigawatts during the quarter, stabilized 72 megawatts of projects, and sold a turnkey facility “at compelling economics.” He added that demand is “exceptional,” and that every megawatt in the pipeline is in some stage of discussion, including 1.2 gigawatts in LOI or pending lease execution.
Asked how data centers factor into development guidance, Arndt said the company expects about 40% of its $4 billion to $5 billion owned-and-managed development starts guidance to be in data centers, with a “small handful” of starts that feel relatively imminent, including activity expected in the first half of the year.
On project formats, Arndt said the overall program is expected to be about 60% to 70% Powered Shell, with some portion reserved for turnkey development. He noted that customers can shift from Powered Shell to turnkey even in later stages.
Letter said Prologis remains comfortable with its previously discussed 10-gigawatt power pipeline opportunity, describing power readiness as “lumpy” based on when sites are energized, and added that there is “a lot behind that” further down the road.
2026 guidance and factors influencing growth
For 2026, management guided average occupancy of 94.75% to 95.75%, reflecting an expected seasonal drop in the first quarter before rebuilding over the year. Net effective same-store growth is forecast at 4.25% to 5.25%, and cash same-store growth at 5.75% to 6.75%.
Other guidance items included:
- G&A: $500 million to $520 million
- Strategic capital revenue: $650 million to $670 million
- Development starts (owned and managed): $4 billion to $5 billion (including data centers at ~40%)
- Acquisitions: $1 billion to $1.5 billion
- Combined contributions and dispositions: $3.25 billion to $4.25 billion
- GAAP earnings: $3.70 to $4.00 per share
- Core FFO (including net promote expense): $6.00 to $6.20 per share
- Core FFO (excluding net promote expense): $6.05 to $6.25 per share
Addressing same-store assumptions, Arndt said rent change will be a smaller contributor than in 2025, with 2026 rent change inferred to be in the “high 30s or roughly 40%,” compared with 50% in 2025. He said occupancy drag will be “a little bit less,” and also cited lighter FDLA from the Duke acquisition, which he said still drags net effective same-store growth by roughly 75 to 100 basis points but should gradually diminish over time.
In concluding remarks, management said it enters 2026 from a “position of strength,” citing operating momentum and continued progress in development entitlements, strategic capital, data centers, and energy.
About Prologis (NYSE:PLD)
Prologis, Inc is a real estate investment trust (REIT) specializing in logistics and distribution facilities. The company focuses on acquiring, developing, and managing high-quality industrial real estate assets that support supply chain infrastructure for third-party logistics providers, e-commerce businesses, retailers and manufacturers. Its portfolio primarily consists of warehouse and distribution centers designed to optimize goods movement and storage near key transportation hubs.
With a global presence, Prologis serves customers across the Americas, Europe and Asia Pacific.
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