Prologis Reports Q3 2026 Results and Raises Development Starts Guidance

On Thursday, Prologis (NYSE: PLD ) discussed third-quarter financial results during its earnings call. The full transcript is provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

Access the full call at Summary Prologis reported strong financial performance in Q3 2026 with core FFO of $1.60 per share, achieving 95.6% occupancy and a 38% rent change on rollover. The company signed 60 million square feet of new leases and is on track for $15 billion in capital activity for the year. Prologis reached an important milestone with SEGRO shareholders approving a combination, expanding its European portfolio to 363 million square feet. Market conditions are favorable with a 27% gap between replacement cost rents and current market levels, setting the stage for potential rent growth.

Prologis increased its development starts guidance and expects strong future demand in logistics and data centers, despite higher interest rates. The company is well-positioned with a strong balance sheet, holding 95% of its debt on a fixed-rate basis and nearly $9 billion in liquidity. Prologis raised $2.4 billion in common equity and secured $1.3 billion in debt financing, supporting its strategic initiatives and the SEGRO transaction. Future guidance includes a net earnings range of $4.05 to $4.15 per share and core FFO of $6.25 to $6.29 per share.

Full Transcript OPERATOR Greetings and welcome to the Prologis third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad.

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Justin Ming, Global Head of IR and Strategic Initiatives. Thank you. You may begin.

Justin M., SVP, Global Head of Investor Relations & Strategic Initiatives Thank you, operator, and good morning everyone. Welcome to our third quarter 2026 earnings conference call. Joining us today are Dan Letter, CEO, Tim Arndt, CFO, and Chris Caton, Managing Director. I'd like to note that this call will contain forward-looking statements within the meaning of the federal securities laws, including statements regarding our outlook, expectations and future performance.

These statements are based on current assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings and third quarter earnings press release for a discussion of these risks. We undertake no obligation to update any forward-looking statements. Additionally, during this call we will discuss certain financial measures such as FFO and EBITDA that are non-GAAP and in accordance with Reg G.

We have provided a reconciliation to the most directly comparable GAAP measures in our third quarter earnings press release and supplemental. Both are available on our website at And with that, I will hand the call over to Dan. Dan Letter, Chief Executive Officer Thank you, Justin, and good morning everyone. The third quarter was another strong example of our business model at work.

Operations were excellent. We signed 60 million square feet of leases and fully replenished our pipeline, giving us clear visibility into what our customers need. We also remained active deploying and recycling capital and are on track for $15 billion of activity this year. We reached another important milestone during the quarter.

On September 28, SEGRO shareholders overwhelmingly approved the combination of Prologis and SEGRO. Following completion, we will have a 363 million square foot operating portfolio in Europe with greater scale to serve customers and a broader set of development opportunities across logistics and data centers. We appreciate the constructive engagement with the SEGRO leadership team and look forward to closing the transaction. Before Tim walks you through the quarter, I want to spend a few minutes on the current environment, especially with the recent move in interest rates and how Prologis is positioned.

Operating fundamentals are healthy and we remain constructive on the outlook. Most of our customers are operating efficiently, so incremental growth in their businesses should translate into additional space requirements. At the same time, several long-term trends continue to drive demand for logistics real estate, e-commerce, advanced manufacturing, and the build-out of the data center supply chain are all critical to the modern economy. Taken together, we expect demand to remain resilient even in a higher rate environment.

On the supply side, the bar for new development is going up. Construction costs are escalating, financing is more expensive, and return requirements are trending higher. That makes projects harder to pencil at today's rents. All else equal, we expect fewer starts and a more favorable supply environment.

That creates an attractive setup for rents. In a balanced market, logistics rents should grow above inflation over time. Today, the rents needed to justify new construction have expanded to 27% above current market levels. That leaves meaningful room for rents to grow before new supply makes economic sense.

That said, the capital markets backdrop has become more challenging. We think the recent move in rates will slow transaction activity and could put some pressure on values. Our bar for allocating capital was already high and, in response, we've raised it even further. But the fundamentals of logistics real estate remain strong and our balance sheet gives us the flexibility to invest through changing market conditions.

We also have an enormous opportunity in data centers where our land, power, and development capabilities give us multiple ways to create value. Add to that what we can do across energy and strategic capital and we are well positioned to create value for our customers and shareholders. With that, I'll turn the call over to Tim. Tim Arndt, Chief Financial Officer Thank you, Dan.

We delivered another excellent quarter with core FFO of $1.60 per share and $1.61 per share excluding net promote expense. We ended the quarter with 95.6% occupancy, up 10 basis points from the second quarter, with average occupancy of 95.1%, also a 10 basis point increase. Rent change on rollover was 38% on a net effective basis, adding $85 million of incremental NOI. And on a cash basis, rent change was 23%.

Our lease mark-to-market ended the quarter at 16%, representing approximately $780 million of embedded NOI at spot rents. This does not capture the additional upside we expect as inflation and today's elevated replacement cost rents flow through over the coming years. In aggregate, we delivered same-store NOI growth of 5.7% on a net effective basis and 5.9% on cash. Turning to capital deployment, we started $1 billion of development in the third quarter, bringing year-to-date starts to nearly $5 billion.

Alongside this volume, we've been very successful replenishing strategic land positions and upholding a long runway for value creation. We own or control sites to develop the next $40 billion of logistics development with a highly capital-efficient land strategy. We acquired $950 million of real estate during the quarter at an estimated discount to replacement cost of 20%. Our disposition activity totaled $310 million, and we continue to focus on the positive IRR spread we generate between acquisitions and dispositions, which now stands at 150 basis points year to date.

In terms of data centers, the increasing difficulty of powering and entitling sites is certainly adding scarcity value to our portfolio, particularly alongside exceptionally strong customer demand. Our pipeline currently totals 5.8 gigawatts, including 1.7 of secured power and 4.1 in advanced stages. We are engaged with customers across the pipeline, with letters of intent covering approximately 1 gigawatt, much of which we expect to start in 2027. Turning to market conditions, the recovery in logistics demand continues to gain momentum.

U.S. net absorption totaled 63 million square feet in the third quarter, a healthy level and consistent with what we view as a normalized annual range of 230 to 240 million square feet. This further underscores the growing improvement we've been highlighting for nearly two years. Market vacancy declined 10 basis points to 7.1% and market rents increased another 50 basis points, marking the third consecutive quarter of positive rent growth across the U.S.

Demand is broadening across geographies and size categories, with markets such as Houston, Dallas, and Atlanta continuing to lead. At the same time, conditions are improving in markets that have been slower to recover. Southern California is steadily improving, Northern New Jersey is picking up momentum, and the San Francisco Bay Area stands out for its high occupancy and strong rent growth, all creating potential for future outperformance. Consistent with prior quarters, the recovery is being led by notable strength across e-commerce, advanced manufacturing, and the rapidly growing segment of customers supporting the data center supply chain.

This customer segment represented approximately 10% of our new leasing globally and 17% in the U.S. this quarter. We're seeing that demand translate into meaningful activity across several U.S. markets that are geographically aligned with the data center buildout underway—markets like Texas, Northern California, Northern Virginia, Arizona, and select Midwest markets.

Our current estimate is that these customers will require upwards of 150 million square feet of demand through the end of the decade for both buildout and ongoing service of this new segment, a topic we explore in greater depth through research we plan to publish in the coming weeks. Beyond the U.S., our global platform is designed to deepen customer relationships and expand value-creation opportunity, but it is also key to delivering resilient, diversified operating performance. In this regard, Europe continues to show solid operating fundamentals.

Market vacancy has remained low at 5.3% and market rents increased 70 basis points during the quarter, now amounting to 275 basis points year over year. The Netherlands, UK, Spain, and Italy remain among the stronger markets for both rents and deployment opportunities, and across Latin America, Brazil continues to lead while Mexico is normalizing as we saw in the U.S. Even as market rents soften, Mexico's heightened lease mark-to-market is delivering strong rent change and same-store growth. Finally, in Japan it is noteworthy that the higher rate and inflation environment is translating to growing market rents aided by declining market vacancy.

Moving to capital markets, U.S. transaction volume is up 20% year to date and for most of the year risk appetite and pricing improved alongside operating fundamentals. Clearly the market is now digesting the recent increase in Treasury yields and we are observing a wider bid-ask spread while investors contemplate re-underwriting exit cap rates. The corresponding reassessment for higher rents provides the potential to offset some pressure on values.

We expect transaction volumes to moderate in the near term as buyers and sellers recalibrate, and while some short-term noise is likely, we believe the scarcity of high-quality assets with inflation-plus growth characteristics will continue to attract global capital. Turning to a brief update on Segro, as Dan mentioned, we are very pleased with the progress made during the quarter, having reached agreement with the board for a recommended deal and subsequently obtaining approval from the Segro shareholders. The transaction is now progressing through the required regulatory clearances and we continue to expect it to close in the first half of 2027.

We also raised $2.4 billion of common equity during the quarter, completing an important part of the transaction's consideration. Further rounding out the balance sheet, we closed out approximately $1.3 billion in debt financing at an average rate of just under 4% during the quarter. More broadly, while the abrupt shift in the interest rate environment presents challenges, we are fortunate to hold approximately 95% of our debt on a fixed-rate basis, with approximately 8 years of average life remaining. Our debt metrics remain in excellent shape and our liquidity at the end of the quarter was nearly $9 billion.

Turning to guidance, which I'll review first in our operations, we are narrowing our forecast for average occupancy to a range of 95.25% to 95.5%. Our strong year-to-date performance in same-store growth is driving an increase to its range to 5.5% to 6% on a net effective basis and 7% to 7.5% on a cash basis. Strategic capital revenue excluding promotes is being revised to a range of $650 to $660 million, reflecting a tempered view on asset management fees as well as the timing of some transaction-based fees. And G&A is now expected to range between $515 to $525 million.

On capital deployment, we are increasing development starts on an owned and managed basis to a range of $6 to $6.75 billion. This increase is driven predominantly by our expectation for a very high fourth quarter of build-to-suit starts and all of the remaining activity will be in new logistics development. In total and for the year, we expect build-to-suits to represent between 55% and 65% of the year's starts. We're increasing our acquisitions guidance to $2.1 billion to $2.3 billion and expect contributions and dispositions to range from $3.5 to $4.75 billion.

Putting it all together, we expect net earnings to range between $4.05 and $4.15 per share. And core FFO is expected to range between $6.25 and $6.29 per share, both with and without promotes. In closing, our third quarter results confirmed that our underlying business and market conditions remain strong, demand is broad, our portfolio is performing very well, and our land and power positions create significant opportunities for value creation underneath our global platform. Strong balance sheet and proven team position us to respond to changing conditions and invest with discipline in the opportunities ahead.

With that, I will turn the call over to the operator for your questions. Operator, thank you. OPERATOR We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions.

Our first question comes from the line of Michael Goldsmith with UBS. Please proceed with your question. Michael Goldsmith, Analyst at UBS Good afternoon. Thanks a lot for taking my question.

You've now had several straight quarters of positive rent growth. Vacancy is down to 7.1%. You're describing normalized absorption of roughly 230 to 240 million square feet annually. At the same time, replacement cost rents are now 27% above market rents, making new supply more difficult.

I think you said 1.7% of stock under construction. So if absorption stays around this normalized level, how quickly can vacancy tighten from here? And when do you think that would translate into more meaningful acceleration in pricing power? Thank you.

Chris Caton, Global Head of Research Hey Michael, it's Chris. That's a really nice way to ask for 2027 forecast of market conditions. Let me give you a few pieces and I'll just underline some points you're making and then I'll let you make your own inferences. And you're right, you're right.

The facts on the ground are constructive as we look into 2027, but it's just early to share our forecast. And I want to underline it's not just in the third quarter, it's all year that net absorption has been running at 240 million square feet on an annualized basis. And as we take a sense of where demand is running today based on the proprietary data we have—so I'm looking at our pipeline and looking at our customer conversations and the progression through the pipeline—that's all very promising. And indeed vacancy's moved down from a peak of seven and a half at seven-one, it's on pace to go to seven by the end of the year.

So there's really nice momentum there. And the replacement cost rents do set up for above-inflation growth over time. I think the detail to add that you don't have is we're already seeing it in some markets. So places like Dallas, Houston, Atlanta, Phoenix, Indianapolis, Northern California—these are all markets that are on pace to have market rent growth of 5% to 6% this year.

And that's even with vacancies in the mid to high sevens in some of these geographies all this year. So what's really made the difference for those cities is just healthy demand rather than needing vacancy to go to 3%, 4% or 5%. And so those are some facts I would consider if I were you as I was making my own determination. Justin M., SVP, Global Head of Investor Relations & Strategic Initiatives Thank you, Michael.

Operator, next question. OPERATOR Thank you. Our next question comes from the line of Michael Griffin with Evercore ISI. Please proceed.

Michael Griffin, Analyst at Evercore ISI Great, thanks. Dan, I think you mentioned in your prepared remarks that the bar for new development is higher, but you modestly increased the development starts guidance. Just wondering how you can marry those two aspects. Do you think Prologis is in a better position to execute on developments given maybe a more favorable basis in your land, you know, more efficiencies on the cost side.