Prologis: Strong Despite Tariff Concerns
Key Points
Prologis reported strong FFO growth for the second quarter of 2025.
Cash rent change on new and renewal leases was almost 35%.
The company raised its full-year guidance for FFO, acquisitions, and development.
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Here's our initial take on Prologis' (NYSE: PLD) fiscal 2025 second-quarter financial report.
Key Metrics
| Metric | Q2 2024 | Q2 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Rental revenue | $1.853 billion | $2.037 billion | 4.6% | Beat |
| Core FFO per share | $1.34 | $1.46 | 9% | Beat |
| Occupancy | 96.3% | 94.8% | -150 bps | n/a |
| Cash rent change | 51.4% | 34.8% | N/A | n/a |
A Solid Quarter in a Challenging Environment
Prologis certainly isn't the most tariff-prone business in the world, but with a global network of logistics properties, there have been fears that demand for its rental properties could suffer. But Prologis' second-quarter results were quite strong, and gave investors some relief.
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For starters, Prologis reported core funds from operations (FFO), a great metric of real estate "earnings," that was 9% greater than the same period last year. Rental revenue came in at $2.04 billion, which was ahead of estimates.
Beyond the headline numbers, Prologis' occupancy remained strong at 94.8%, and as we've seen in recent years, cash rent change on new and renewal leases averaged a stellar 34.8%. In other words, when someone renews their lease with Prologis, they're paying nearly 35% more than they were under the old agreement. The short explanation is that demand (and rental rates) for industrial properties soared during the pandemic, and many of Prologis' existing leases were from prior to that time. As these leases mature, rental rates are being brought in line with the market.
Prologis ended the first quarter with $7.1 billion in liquidity and a stellar balance sheet, so it is ready to act as opportunities arise.
Finally, Prologis slightly increased its full-year guidance. Excluding net promote income (which isn't consistent), the company increased its full-year core FFO forecast by more than $0.04 at the midpoint of the range. Forecasts for development starts and acquisitions were also raised.
Immediate Market Reaction
Not surprisingly, the immediate reaction to Prologis' second-quarter numbers was a positive one. As of 8:15 a.m. EDT, about 15 minutes after the earnings release, shares were up by about 2%. It's worth noting that this reaction was before management's earnings call, so it's possible that whatever is discussed could move the stock in one direction or the other.
What to Watch
Prologis' management has been saying that industrial real estate is nearing an inflection point for a few quarters, and frankly, it doesn't look like we are there quite yet. But if interest rates start to cool off later this year, it could certainly be a strong catalyst. CEO Hamid Moghadam said that customers, especially Prologis' larger customers, are "increasingly ready to act," so this will be worth watching going forward.
Helpful Resources
- Full earnings report
- Investor relations page
- Additional coverage: 3 Reasons to Buy Prologis Stock
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Matt Frankel has positions in Prologis. The Motley Fool has positions in and recommends Prologis. The Motley Fool recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.
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