Prologis' Earnings Double, Fueled By Postelection Leasing Bump

The November election of Donald Trump spurred a spike in industrial leasing that drove profits for the world's largest industrial landlord, setting it up for continued growth in 2025.

San Francisco-based Prologis more than doubled its net earnings in the fourth quarter over the previous year, going from $629M, or 68 cents per share, at the end of 2023 to nearly $1.3B, or $1.37 per share, at the end of last year. Core funds from operations also increased 19% to $1.50 per share, the company revealed during its fourth-quarter earnings call Tuesday. 

Prologis beat earnings projections in the fourth quarter with total revenue of more than $2.2B, surpassing the $1.94B consensus estimates.

That postelection bump drove Prologis to set a company record with more than 60M SF of leases signed in Q4, Chief Financial Officer Tim Arndt said.

The market was very different before and after the election, Prologis President Dan Letter said during the earnings call.   

“The first part of the quarter … was very quiet, and we did hear from customers they [were] waiting to see what was going to happen with the election,” Letter said. “Then postelection, it really was this boom, and we've had really 10 weeks of very solid decision-making. And it's unlocking previously stalled deals.”

Prologis’ occupancy rate fell from 95.9% in Q3 to 95.6% in Q4. That dip is likely to continue in 2025, as Arndt said the company is forecasting average occupancy to tick down to between 94.5% and 95.5% for the first half of the year. 

However, the forecast calls for net absorption to improve around 20% over 2024 and continue building gradually throughout the year.

Completions are expected to decline significantly, with a supply forecast around 35% below 2024, Arndt said.

“As such, we expect a decline in vacancy over the year, which will pave the way for rent growth,” Arndt said. “Longer term, we continue to see the path for uplift from market rents to replacement-cost rents, a dynamic that will build upon our already significant lease market. Today, we see replacement costs as 50% higher than in-place rents.”

Going forward, Prologis expects core funds from operations for 2025 to land between $5.65 and $5.81 per share, while the average analyst's estimate was $5.79. Acquisition spending is slated to be between $750M and $1.25B.

“We are forecasting development starts to range between $2.25B and $2.75B,” Arndt said. “We will continue to be selective in our starts and clearly have a lot of capacity to grow this number as conditions, rents and returns warrant.”

That guidance doesn’t include data centers, a heavy new focus for the company. Prologis expects as much as 400 megawatts of projects to begin in 2025. In addition, Arndt said 2025 would be an important year for Prologis’ energy business, forecasting the company will hit its 1-gigawatt goal for solar generation and storage by the end of the year. 

The sale of its data center development in the Chicago suburb of Elk Grove Village last quarter was a showcase of Prologis’ growing data center development capabilities, Arndt said. The company is looking to build 10 GW over the next decade, but that is only based on the portfolio of 6,000 buildings and 15,000 acres Prologis owns.

There is a whole “universe of opportunities” beyond those assets, Letter said.

“Elk Grove started out being a power shell and ended up being a turnkey [data center], so that will maybe increase the capital spend by a factor of two,” Prologis CEO Hamid Moghadam said. “We're more comfortable projecting megawatts than dollars, but regardless, we can handle it.”

The market reacted positively to the quarterly report, with Prologis’ stock price up more than 7% as of 3 p.m. ET on Tuesday.