- Prologis told investors it expects $5B to $5.75B of development underway at year-end and raised 2026 acquisition guidance to $2.1B to $2.3B from $1.5B to $2B.
- The REIT signed 60M SF of leases in Q3, lifted average occupancy to 95.1% from 94.8%, and reported $2.39B in revenue and $1.60 in core FFO per share.
- Higher rates could slow transactions and pressure values, but data center and power deals made up 17% of U.S. leasing and could create 150M SF of demand through 2030.
Prologis now expects $5 billion to $5.75 billion of development underway at year-end, up from $4.5 billion to $5.5 billion, according to Commercial Observer.
Executives told investors on the Q3 earnings call that more starts and acquisitions are coming, but that higher rates could slow transactions.
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Leasing and Earnings
CEO Dan Letter told investors Prologis signed 60 million SF of leases in Q3, and average occupancy improved to 95.1% from 94.8% a year earlier, Commercial Observer reported.
Quarterly revenue was $2.39 billion, a slight dip from Q2’s $2.43 billion but ahead of last year’s $2.21 billion. Core FFO reached $1.55 billion, equal to $1.60 a share on a diluted basis, and net income to common shareholders was $816 million.
More Building and Buying
CFO Tim Arndt told investors Prologis bought about $702 million of property in Q3, versus $1.12 billion in Q2 and $48 million a year ago. The REIT raised 2026 acquisition guidance to $2.1 billion to $2.3 billion.
Prologis started roughly $1 billion of projects in Q3, bringing starts so far this year to almost $5 billion. Arndt attributed the higher outlook to a very strong Q4 for build-to-suit work, Commercial Observer reported.
Letter told investors the build-to-suit backlog runs 20% to 25% above a year ago, per Commercial Observer, and should make up 55% to 65% of this year’s starts.
A Higher Bar for Spec
Commercial Observer reported that Letter told investors rents needed to justify new projects now sit 27% above market, a gap that should restrain new supply and help rents over time. He added the latest rate jump could slow transactions and pressure values, so Prologis has raised its capital allocation bar.
Managing Director Chris Caton told investors Southern California, the largest U.S. industrial market, continues to recover.
Why It Matters
Data center and power deals made up 10% of new leasing overall and 17% in the U.S. in Q3, Commercial Observer reported. Prologis projects the segment could generate over 150 million SF of industrial demand by 2030, which fits CRE Daily’s reporting that power access now drives site selection.
Letter told investors that hyperscaler decisions are multibillion-dollar and slow, so the business stays lumpy, Commercial Observer reported.
What’s Next
Commercial Observer reported that Sergo, a U.K. warehouse REIT, won shareholder approval in Q3 for its $18.8 billion merger into Prologis. Closing is targeted for H1 2027 and brings a 363 million SF European portfolio.
Watch Q4 build-to-suit starts and whether rising rates cool acquisitions, as shown by industrial leasing data from local markets.
