Dive Brief:
- Prologis raised its full-year earnings guidance on Wednesday as executives noted an improved outlook around tariff-related volatility, with President Dan Letter saying on the company earnings call that customers have "definitely become more desensitized to the short-term noise as they look at making long-term decisions.”
- The San Francisco-based industrial real estate investment trust reported net earnings attributable to common stockholders slid to $0.82 in Q3 compared to $1.08 in the year-earlier period, but total revenues rose to $2.21 billion in the period from $2.03 billion YOY. Occupancy ticked up sequentially to 95.3% at quarter end from 95.1% in Q2, though it was still below the 95.9% seen in Q3 of 2024.
- “We see a more positive tone across the platform with strengthening customer sentiment, improved leasing velocity and continued success in build-to-suit activity, which taken together suggests the market has found its footing and the stage is set for an inflection in occupancy and rent,” Prologis CFO Tim Arndt said on the earnings call.
Dive Insight:
The executives’ tone this week was brighter than that struck on the company’s Q1 call, which took place shortly after President Donald Trump in April acted on his longstanding pledge to enact broad-based levies on global imports. Trump’s policies have resulted in the highest U.S. tariffs since the 1930s.
“Even with the pause in some tariffs or resolution of others, customers simply lack a steady backdrop upon which to plan their businesses,” Arndt said back in April, when the company opted to maintain rather than raise earnings guidance, CFO Dive previously reported.
This week, Arndt said larger tenants were reconfiguring consolidation strategies and shifting to “network optimization rather than contraction.” The company also raised its 2025 guidance for net earnings attributable to common stockholders to a range of $3.40 to $3.50, up from $3 to $3.15.
Morningstar Senior Equity Analyst Suryansh Sharma, writing in a Wednesday report, said Prologis management’s “optimistic picture of a recovery in the industry” helped drive the company’s shares up 6%.
“We have seen early indications of demand picking up, as supply-side deliveries remain low,” Sharma wrote. “If macroeconomic conditions remain strong, we see a scenario where market rents can jump sharply. Having said this, a repeat of the post-COVID boom is a highly unlikely scenario, in our opinion.”
In May, Arndt told CFO Dive that a strategy of low leverage and an emphasis on liquidity and pushing debt maturities when possible puts the company in a strong position to weather the current economy’s headwinds. For example, the company carries three different credit lines, each with roughly 30 banks in them and overlapping and staggered maturity lines that he said Prologis seeks to leave largely untapped.
On Wednesday, Arndt said the company had closed on $2.3 billion in financing activity across the REIT and funds, noting “our global access to capital remains one of the defining strengths of our franchise, with an in-place cost of debt at just 3.2% and more than eight years of average remaining life.”
