Release Date: January 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Prologis Inc (PLD, Financial) achieved a company record by signing over 60 million square feet of leases in the fourth quarter.
• Core FFO, excluding net promote income, was $1.42 per share, and including net promotes was $1.50 per share, ending the year at the top end of guidance with 8.4% growth over 2023.
• The company successfully contributed $2 billion of assets to strategic capital ventures, bringing the full year total to over $3.3 billion.
• Prologis Inc (PLD) has a robust development pipeline with $4.7 billion in projects and an estimated value creation of $1.1 billion.
• The company is making significant progress in its data center and energy initiatives, with 1.4 gigawatts of secured power and plans to hit a 1-gigawatt goal for solar generation by year-end 2025.

Negative Points

• The company is facing challenges due to the devastating wildfires in Los Angeles, impacting its operations and community.
• Market rent growth has been slower, with a decline of approximately 2% in the fourth quarter, particularly affecting Southern California.
• Prologis Inc (PLD) anticipates a dip in occupancy over the next one to two quarters, with average occupancy forecasted between 94.5% and 95.5%.
• Capital flows in 2024 remained challenging, with muted capital raising in open-end vehicles during the fourth quarter.
• The company is experiencing a higher level of uncertainty due to geopolitical factors, including tariffs and potential changes in immigration policies.

Q & A Highlights

Q: Can you elaborate on the 2025 guidance, particularly regarding lease spreads, bad debt assumptions, and occupancy? A: Timothy Arndt, CFO, explained that rent spreads are expected to be in the 50% range, with bad debt forecasted between 20 and 30 basis points. Occupancy is anticipated to be broadly similar across the company and the same-store pool.

Q: How do you reconcile the positive leasing comments with the decline in space utilization? A: Chris Caton, Managing Director, noted that the dip in utilization was due to unexpectedly healthy consumption growth and holiday sales, which pulled goods out of the supply chain. Customers are reporting rising utilization and inventory building in 2025.

Q: What was the market rent growth in 2024, and what is the forecast for 2025? A: Chris Caton stated that rents declined roughly 2% in the quarter, with coastal and non-coastal differentials narrowing. For 2025, most markets are stable, with modest declines expected in some submarkets, but an inflection in positive growth is anticipated later in the year.

Q: What are the expectations for development starts in 2025, and what factors could influence an increase? A: Daniel Letter, President, mentioned that development starts were deliberately slowed in 2024. Improvement in market conditions and rent returns could lead to increased starts. The company has a large land portfolio ready for development when conditions are favorable.

Q: How has leasing activity changed post-election, and what is driving this change? A: Daniel Letter noted a significant increase in leasing activity post-election, with previously stalled deals being unlocked. This is attributed to reduced uncertainty and improved decision-making among customers, particularly in e-commerce and 3PL sectors.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.