Prologis (PLD) Q3 2026 earnings review
Prologis warehouse rents rise, but it starts no data centers
Prologis's warehouses earned more and rents on new leases kept climbing, but its data-center programme went quiet. Core funds from operations, the profit measure property owners use, rose 7% per share, and new leases pay 38% more than the ones they replaced. Chief executive Daniel Letter said customers are running lean on inventory. Yet the company started no data centers this quarter, and its secured power for them stayed at 5.8 gigawatts.
| Core FFO per share, the profit measure property owners use | $1.60 +7% from a year ago |
|---|---|
| Same-store rent income growth, cash basis | 5.9% 8.5% last quarter |
| Full-year Core FFO outlook | Raised $0.01 middle of the range: $6.27 |
| Full-year net earnings outlook | Cut $0.38 middle of the range: $4.10 |
⚖️ Verdict: ⚪ Neutral
The story is unchanged, because the two engines pulled opposite ways. Rents and the rent-growth plan moved up, while data-center starts stopped and the net earnings outlook came down. One caution: Prologis issued new shares and now buys buildings at lower yields than it sells, ahead of a SEGRO purchase whose terms it has not described.
The question now is whether the data-center pause is timing or the first sign of slower orders from cloud customers. If starts resume in the fourth quarter, the pipeline is converting on plan; if they stay at zero, growth rests on warehouses alone. Fourth-quarter starts and the year-end pipeline figure will tell.
🐂 Bull Case
New-Lease Rents Rose for a Second Quarter
Prologis reports rent change: how much more a new or renewed lease pays than the lease it replaced on the same space. On a net effective basis, which averages the rent over the whole lease term, that uplift reached 38.0% this quarter, up from 36.9% in the second quarter.
The gain came while the warehouse owner started fewer leases. Leases that began in the quarter covered 55.9 million square feet, down from 61.7 million. But existing customers stayed more often, because retention climbed to 75.9% of expiring space, and chief executive Daniel Letter said customers 'are running lean on inventory'.
- Cash rent change: 23.4%, up from 22.3% last quarter
- Average occupancy, Prologis share: 95.1%, up 0.2 points from the second quarter
- Lease proposals sent to customers: 134 million square feet, against a long-run average of 86 million
- Customer retention: 75.9%, up from 72.7%
This matters because the uplift on new leases is the main source of the group's rent growth, so a second rise in a row says the gap between market rents and the rents written years ago widened rather than narrowed. A year ago the uplift was 49.4%, so the base effect is working against it, and it still rose.
What to watch: net effective rent change next quarter, against this quarter's 38.0%. A third consecutive rise would mean market rents, not the mix of leases, are driving the gain.
Prologis Raised Its Rent-Growth Plan Again
Same-store NOI measures rent income less property costs on the buildings Prologis owned throughout both years, so it strips out purchases, sales and new developments. Cash same-store growth slowed to 5.9% from 8.5% in the second quarter. The company still lifted its full-year range, to 7.00–7.50%, the third increase this year.
The raise holds up because the first half ran far above the earlier plan. By our math, the June outlook left room for only about 4.9–5.9% growth in the second half, so this quarter's 5.9% sat at the top of that band. The new range leaves about 4.8–6.8% for the fourth quarter, close to this quarter's pace.
Development starts rose with it. Prologis lifted the full-year starts range to $5.0–5.75 billion, also a third increase, and all $964 million of this quarter's starts were warehouses. Core FFO, the profit measure property owners use, moved up one cent at the middle of its range, so the plan now rests on rent rather than on one-off gains.
What to watch: fourth-quarter cash same-store growth against the 4.8–6.8% the new plan leaves for it, by our math. A reading above that band would mean the company set its plan with the same caution for a fourth time.
Positives this quarter didn't test
Two standing strengths got no new reading in the release or the supplement this quarter, so they stay on the list without moving it either way.
- Strategic capital, the business of managing other investors' money: third-party assets rose to $68.3 billion from $67 billion at year-end, but annualized fee earnings held at $272 million and promotes cost $10 million net; a new fund or a promote payment would move it.
- Data-center sales: no finished data-center package went to buyers this quarter; the next sale and its margin are the test of whether the programme earns what management describes.
🐻 Bear Case
No Data-Center Starts, and the Pipeline Stood Still
Prologis builds data centers for a handful of large cloud customers on land where it has secured electrical power. Letter named 'the build-out of the data center supply chain' among this quarter's demand drivers, and the programme is the second leg of the growth case.
Yet the quarter produced nothing new on that leg. Development starts of $964 million were all warehouses, so the year's data-center starts stayed at $2.0 billion, the same figure as at mid-year. The power pipeline, the capacity secured or in advanced talks with utilities, stayed at 5.8 gigawatts for a second quarter.
- Data-center starts this quarter: none; year to date $2.0 billion, unchanged from June
- Power pipeline: 5.8 GW, of which 1.7 GW secured and 4.1 GW in advanced talks
- Value created on developments completed and leased: $39 million, down from $169 million a year ago
- Margin on this quarter's completions: 9.7%, against 23.9% for the year to date
The pipeline only earns when projects start, so a quarter with no starts and no pipeline growth means it neither grew nor converted. Management said earlier this year that about 85% of the pipeline supports starts through 2030, which requires roughly a gigawatt of starts a year by our math. This quarter's completions were warehouses, and their thin margin shows how much of the year's development profit the first-half data-center starts carried.
What to watch: fourth-quarter development starts and the year-end pipeline figure. A fourth quarter with no data-center starts would leave the year at $2.0 billion and mean the pipeline is converting slower than a gigawatt a year.
Prologis Buys More, Sells Less, Issues Shares
Finance chief Timothy Arndt described 'another quarter of strong operating performance and disciplined capital allocation'. Three figures in the release and supplement cut against that reading, and all three sit next to the planned purchase of SEGRO plc, the European company Prologis is buying to expand there, whose shareholders approved the deal this quarter.
First, the company raised its acquisitions range to $2.1–2.3 billion and cut both its dispositions and contributions ranges, so it will buy more and sell less. Second, the net earnings outlook fell to $4.05–4.15 per share from $4.40–4.55. Core FFO, the measure that leaves out gains on property sales, moved up a cent, so lower expected sale gains sit behind the cut.
Third, shares and partnership units outstanding rose to 969.5 million from 952.0 million at June 30. Stockholders' equity grew $2.2 billion in a quarter when dividends exceeded profit, so by our math Prologis raised roughly $2.4 billion of new equity. It also holds $1.0 billion of short-term investments it did not have in June, and the release does not say what the money is for.
The exchange gives up income because this quarter's purchases carried a 4.2% yield while the buildings sold carried 5.1%. New shares then spread the remaining income over more holders, which is why per-share growth, not dollar growth, is the number to hold the SEGRO deal against.
What to watch: the SEGRO consideration and financing when the offer documents arrive. A mostly share-funded deal would mean the new equity dilutes per-share growth for longer than one quarter.
The Occupancy Plan Needs a Fourth-Quarter Jump
Prologis sets its outlook on average occupancy over the year, not the quarter-end figure. The company trimmed the top of its full-year range to 95.50% from 95.75%, after a quarter in which the average for its share of the portfolio came in at 95.1%. The release gives no reason for the trim.
By our math, the three quarters so far average 95.1%, so meeting the range requires a fourth-quarter average of 95.6–96.6%. Buildings were 95.5% occupied on September 30, below the bottom of that band, and the materials do not say what move-ins the leasing team has signed for the quarter.
What to watch: fourth-quarter average occupancy against 95.6%. A reading below it would mean the year's same-store growth leaned on rent alone, and would put the net effective same-store range at risk.
Risks this quarter didn't answer
Four standing risks got no decisive new reading in the release or the supplement. One moved slightly against the company; three are not readable from these materials.
- Interest cost creep: new debt of $1.3 billion priced at 4.0% against a 3.3% average on the book, and interest expense rose 11% from a year ago; the rate on the next refinancing will show the gap.
- Lease mark-to-market, the gap between in-place rents and market rents: not in these materials; the quarterly filing will show whether it held at the 17% management last reported or resumed falling.
- Data-center ownership structure, meaning whether Prologis will own, sell or co-own finished data centers: no update; a named vehicle would settle it.
- Local resistance to data-center sites: no update; a delayed named project would be the signal.
👓 Other Themes
Customers Are Running Lean on Inventory, Letter Says
Letter said customers 'are running lean on inventory' and that excess space in their networks 'has largely cleared', with demand from e-commerce, advanced manufacturing and the data-center supply chain. The company's own survey points the same way: its U.S. activity index read 59.1 against a 57.7 long-run average, although customers still use slightly less of their space than the long-run norm.
💲 Other KPIs
Flat on the quarter but up from 3.2% a year ago: free rent is the rent-free period Prologis gives new tenants, so it offsets part of the headline rent increase. Turnover costs, the commissions and fit-out spend on leases that started, were the highest in five quarters at $4.02 per square foot. In dollars they rose 18% from a year ago.
Up 11% from a year ago, faster than revenue's 8%, because Prologis keeps borrowing above its book rate. The $1.3 billion raised this quarter cost 4.0% against a 3.3% average on debt outstanding. Leverage still eased: debt stood at 4.5 times adjusted EBITDA, from 4.7 times in June. Available liquidity was $8.8 billion.
Flat: the yearly run-rate of fees Prologis earns managing other investors' money held at $272 million, against $273 million at year-end. Third-party assets under management reached $68.3 billion. Promotes, the performance fees from those funds, cost $10 million net this quarter because of stock-compensation expense tied to promotes earned in earlier years.
🔮 Guidance
Raised. The middle of the range moved up one cent, to $6.27, and the range narrowed. By our math, with $4.73 earned through September, the plan leaves $1.52–1.56 for the fourth quarter. That is about 7% above a year earlier, but below this quarter's $1.60. Third raise in three quarters, each a different size: +$0.05, +$0.11, +$0.01.
Cut. The middle of the range fell $0.38, to $4.10, reversing most of the June increase. By our math, with $3.04 earned through September, the plan leaves $1.01–1.11 for the fourth quarter, against $1.49 a year earlier. The company's reconciliation ties the gap to Core FFO to depreciation and property-sale gains, so lower expected gains explain the cut. This line is also a formal profit forecast under U.K. takeover rules because of the SEGRO offer.
Cut at the top. The range now sits at 95.25–95.50%, after the first three quarters averaged 95.1% by our math. That leaves a fourth-quarter average of 95.6–96.6%, above the 95.5% occupied on September 30, so the plan assumes move-ins the materials do not describe.
Raised for a third time this year; the midpoint has climbed from 6.25% at the first outlook to 7.25% now. By our math the new range leaves about 4.8–6.8% for the fourth quarter, close to this quarter's 5.9%. The release gives no reason for the slowdown from the first half's 8.8% and 8.5%.
Raised. The midpoint moved up a quarter point, to 5.75%. By our math the range leaves about 3.8–5.8% for the fourth quarter, below this quarter's 5.7%. Net effective growth runs below cash growth because it spreads free rent over the lease term.
Cut. The range fell $15 million at the midpoint and narrowed. Through September the line earned $483 million excluding promotes by our math. The plan therefore leaves $167–177 million for the fourth quarter, in line with this quarter's $164 million.
Unchanged. Prologis still expects promotes, the performance fees from its funds, to net to zero this year after costs. Through September the net figure was $4 million positive, so the fourth quarter carries a small net expense by our math, as this quarter's $10 million did.
Raised at the bottom. Overhead ran $384 million through September, so the range leaves $131–141 million for the fourth quarter against $128 million this quarter. Overhead is growing 15% from a year ago, faster than revenue.
Raised, after three quarters unchanged. Completions reached $2.16 billion through September, so by our math the range leaves $340–840 million for the fourth quarter against $401 million this quarter.
Raised for a third time this year. By our math, with $4.09 billion started through September, the range leaves $0.9–1.7 billion for the fourth quarter, against $964 million this quarter. The outlook footnote says the figure includes data centers, so a fourth-quarter data-center start would land inside it.
Raised for the second quarter running. With $2.09 billion bought through September, by our math the range leaves only $11–211 million for the fourth quarter, so the buying is nearly done. The year's purchases carried a 4.2% yield.
Cut. Contributions are sales of buildings and land into the funds Prologis manages. Through September they totalled about $0.76 billion by our math, so the range still needs $1.0–1.5 billion in the fourth quarter after none this quarter.
Cut. Sales to outside buyers totalled $1.09 billion through September by our math, so the range still needs $0.66–1.41 billion in the fourth quarter. This quarter's building sales came to $91 million.
Unchanged. Through September these gains came to $0.47 per share, about $452 million by our math. The range therefore needs roughly $150–250 million in the fourth quarter, against about $77 million this quarter.
❓ Key Questions
What are the SEGRO terms and how will Prologis pay?
Shareholders have approved the deal, yet the price, the mix of cash and shares and the financing are absent from the release. The new equity and $1.0 billion of short-term investments suggest cash is being set aside; the terms decide the dilution.
Why did Prologis start no data centers this quarter?
Year-to-date data-center starts stayed at $2.0 billion and the power pipeline at 5.8 gigawatts. Whether the pause reflects customer timing, permits or power delivery decides whether the programme converts at about a gigawatt a year.
Where does the lease mark-to-market stand now?
The gap between in-place and market rents was last reported at 17%. It is not in the release or supplement, and it is the figure that says how much rent growth remains after this year's leasing.
Which sale gains fell out of the net earnings outlook?
Net earnings guidance per share fell $0.38 while Core FFO rose a cent and the development-gains range held. The reconciliation points to property-sale gains, but the release does not say which sales slipped or why.
Will Prologis earn fees on data centers or only sale gains?
The funds now formed with partners may or may not cover data centers. Recurring fees would make the programme a lasting business; gains alone make it a series of one-off projects.