Prologis Shakes Off Tariff Doldrums, Predicts Industrial Demand Resurgence
Industrial leasing activity emerged from the trade war’s long shadow after several months of dampening demand, lifting Prologis’ fourth-quarter results and prompting executives to predict sunnier skies ahead for the company and the sector.
The world’s largest industrial landlord inked a record 228M SF of leases in 2025 and had just under 44M SF worth of deals commence in the last three months of the year, with roughly one-quarter of those being new leases and the rest renewals.
On the financial side, the firm reported Wednesday morning that it slightly beat fourth-quarter expectations with $1.4B in profit on $2.1B in revenue. Fourth-quarter revenue was up year-over-year, but core funds from operations slid. Still, both metrics were up for the full year.
The results capped off a fiscal year defined on one side by handwringing from logistics providers and, on the other, explosive demand for data centers driven by artificial intelligence. Executives expect the fading unease among warehouse operators will translate into higher profits in 2026.
“The key message here is that market vacancies are poised to improve over the course of the year,” Chief Financial Officer Tim Arndt said on the firm’s earnings call Wednesday afternoon. “That already began in the fourth quarter, when net absorption outperformed completions, and I anticipate 2026 will play out the same way.”
“New demand is the key variable here,” he said, forecasting net absorption around 200M SF in 2026 across the company's portfolio, up from the 155M SF seen last year.
Fourth-quarter results were bolstered by strong leasing and retention, with a 44% increase in net effective rents adding $66M in net operating income, CEO Dan Letter said in his first earnings call as chief executive following Hamid Moghadam’s retirement on Jan. 1.
Leasing activity from e-commerce firms increased by 20% in the fourth quarter and was at its highest level since 2021, he said.
The firm also issued 2026 guidance, targeting a net-earnings-per-share midpoint of $3.85 and core funds from operations per share of $6.10, compared with its 2025 performance at $3.56 and $5.81, respectively.
President Donald Trump’s tariff regime weighed on activity in 2025, but the tone from Prologis executives incrementally shifted across the year. Arndt said industrial leasing activity had reached a “clear turning point in demand” during the third-quarter earnings call in October.
Company executives didn’t mention tariff policy specifically on the Q4 call, or any other geopolitical concerns as the business and finance world awaits a Supreme Court decision on tariffs and watches movements at this year’s World Economic Forum in Davos, Switzerland.
Prologis ended the year with 101M SF in leases under negotiation, ahead of the 81M SF average and accounting for 35% of Prologis’ available space for rent. The average lease negotiation time has held flat at 54 days.
The industrial mainstay also continued to build out its data center platform, which launched in June 2024 with a focus on power procurement and drew the bulk of analysts’ attention on Wednesday’s call. Prologis has grown its power pipeline to 5.7 gigawatts, up from 5.2 GW of incoming capacity that it reported at the end of the third quarter.
Negotiations for power span the U.S. and Europe, including data center hotspots such as Virginia, Silicon Valley, Chicago and New Jersey as well as smaller markets like Austin, Las Vegas, Phoenix, Boston and Denver, Arndt said.
All of the power Prologis had secured was earmarked at some level for a prospective tenant, with letters of intent out or pending for 1.2 GW. Powered shell development is expected to account for 60% to 70% of its data center projects, although Arndt said there was strong client demand for turnkey construction.
The growing number of new construction starts also signals that Prologis’ customers are moving ahead on large development projects. It broke ground on $1B in developments during the fourth quarter, lifting its total 2025 development pipeline to $3B in new projects.
Just under half of the projects that broke ground in the fourth quarter were build-to-suit, compared to 61% of projects across 2025. The smaller proportion of build-to-suit projects suggests that Prologis is becoming more comfortable with speculative development as a glut of pandemic-era construction weighs on overall inventory.
Prologis is forecasting between $3B and $4B in capital deployment for development starts across this year. The development figures include the firm’s data center projects, which account for roughly 40% of the pipeline.
Two-thirds of the logistics development pipeline is for projects in the U.S., up 15% from last year, Letter said.
“We have increased visibility and confidence around new starts in our data center business,” Arndt said.
Executives declined to give an exact count of projects or the development timeline, but Arndt said “a small handful” of data center starts “feel relatively imminent,” including one that could break ground this quarter.
