Prologis beats third-quarter estimates and raises its building plans as warehouse tenants run lean

Prologis Inc. said Thursday that third-quarter core funds from operations rose to $1.60 a share from $1.49 a year earlier, ahead of analysts' estimates, as the warehouse landlord said it signed 60 million square feet of leases and raised its plans for new construction.

A quarter ahead of estimates

Core FFO is the profit measure real estate investment trusts use in place of net income. It adds back depreciation on buildings and leaves out gains from selling property. Prologis' figure of $1.60 a share compares with a Zacks consensus estimate of $1.58, and FreightWaves reported that it beat analysts' expectations by 3 cents. Excluding net promote income or expense, an item tied to performance fees from the investment funds Prologis manages, core FFO was $1.61 a share, up from $1.50.

Total revenue rose about 8% to $2.39 billion from $2.21 billion a year earlier. Net earnings were 86 cents a share, up from 82 cents, and the quarterly dividend was $1.07 a share, up from $1.01.

What tenants are doing

"Customers are running lean on inventory, and excess capacity within their networks has largely cleared," Chief Executive Daniel S. Letter said in the release. "We see healthy demand supported by e-commerce, advanced manufacturing and the build-out of the data center supply chain."

Average occupancy in the portfolio Prologis owns and manages was 95.1% for the quarter, and 95.6% at the end of September. Letter said the company signed 60 million square feet of leases. Leases that began during the quarter, a separate measure, totaled 55.9 million square feet, down from 65.6 million square feet a year earlier. Existing tenants renewed 75.9% of the expiring square footage. On new and renewed leases that began during the quarter, rents averaged over the lease term were 38% above the previous rents for the same space, for Prologis' share of the portfolio, down from a 49.4% increase in the third quarter of 2025. Starting cash rents were 23.4% higher, compared with 29.4% a year earlier. Net operating income from properties owned in both periods rose 5.9% on a cash basis.

The guidance moved in both directions

Prologis raised the low end of its 2026 core FFO range by 3 cents and trimmed the high end by a penny, to $6.25 to $6.29 a share from $6.22 to $6.30. That lifts the midpoint by 1 cent. Core FFO for the first nine months was $4.73 a share, so the new range points to roughly $1.52 to $1.56 for the fourth quarter, by TickerGrove's arithmetic, below the $1.60 just reported. The release does not explain the implied step down.

The company lowered its forecast for 2026 net earnings to $4.05 to $4.15 a share from $4.40 to $4.55, without giving a reason in the release. That forecast includes potential gains from selling real estate, which core FFO excludes. Prologis also trimmed the top of its average occupancy forecast to 95.5% from 95.75%, kept the bottom at 95.25%, and raised its forecast for cash same-store net operating income growth to 7% to 7.5% from 6.75% to 7.25%.

Building and buying more

Prologis raised its forecast for 2026 development starts, its share of the cost of new projects including data centers, to $5 billion to $5.75 billion from $4.5 billion to $5.5 billion. It started $964 million of projects in the third quarter at an estimated average yield of 6.6%. It also raised its acquisitions forecast to $2.1 billion to $2.3 billion from $1.5 billion to $2 billion, and lowered its forecasts for property sales and for contributions of buildings to its funds.

The supplemental report put its data center power pipeline at 5.8 gigawatts, made up of 1.7 gigawatts of secured power, including 680 megawatts under development, and 4.1 gigawatts at an advanced stage.

Chief Financial Officer Timothy D. Arndt said the company's performance and balance sheet give it "the capacity and flexibility to continue investing in growth even in a higher interest rate environment." Prologis and its funds closed $1.3 billion of debt in the quarter at an average rate of 4%. It ended September with about $8.8 billion of available liquidity and debt of 4.5 times adjusted EBITDA, and the average rate on its share of debt was 3.3%.

The SEGRO deal

Prologis agreed on Aug. 4 to buy SEGRO, the British warehouse landlord, in a deal it valued at about £14.0 billion, using Prologis' July 21, 2026 closing price of $149.94 and a sterling rate of 1.3371, and assuming shareholders take the partial cash alternative in full. SEGRO shareholders will receive 0.0920 new Prologis shares for each SEGRO share, with the option to take part of the payment in cash, up to a total of about £3.5 billion. SEGRO shareholders approved the plan at meetings on Sept. 28, with about 98% of the shares voted at the court meeting in favor. The deal still needs a U.K. court's sanction and regulatory approvals, and Prologis expects it to close in the first half of 2027.

"On SEGRO, shareholder approval was an important milestone in bringing our two companies together," Letter said.

How the stock is trading

Prologis shares opened at $132.04, above Wednesday's close of $130.46, and FreightWaves reported them up 1.3% in early trading. They later turned lower and were at $127.59 at 12:24 p.m. ET, down 2.2%, according to CNBC market data. Prologis scheduled its conference call for noon ET.