The news: Prologis, the largest owner of warehouses in the U.S., signed a record 67 million square feet of leases in the second quarter and raised its full-year profit forecast for the second time this year. Portfolio occupancy rose to 95.5%.
Prologis leases space to companies like Amazon, Home Depot and DHL. Its results show how much space shippers and retailers are taking. Record leasing and rising occupancy point to a warehouse market tightening again after two soft years.
What it means for retail and e-commerce: E-commerce is still the primary demand driver, head of research Chris Caton said on the earnings call. Demand is now global, not just U.S.-based. The squeeze for retailers and 3PLs is in large buildings.
CFO Tim Arndt said Prologis has “very limited availability” in spaces above 500,000 square feet, and “no availability whatsoever” above 1 million square feet.
U.S. warehouse vacancy fell to 7.2%. Net absorption hit 66 million square feet, the most since 2022.
Market rents rose 70 basis points during the quarter. Texas, the Southeast and the Midwest were the tightest markets.
For a retailer or e-commerce operator planning a regional distribution center, that means higher rents and few big-box options in the markets where demand is strongest.
The AI angle: Prologis said artificial intelligence is becoming a new source of warehouse demand. It estimated that every $1 trillion spent building data centers generates 30 million to 40 million square feet of new warehouse demand because AI projects need supply chain, manufacturing and logistics space built around them.
By the numbers:
Record 67 million square feet leased, its fourth record in seven quarters.
Core FFO of $1.63 per share, up from $1.46 a year ago.
Full-year Core FFO guidance raised to $6.22 to $6.30 per share.
The backdrop: Prologis is separately pursuing UK warehouse landlord Segro with a sweetened $18.2 billion offer. Segro's board rejected the bid as too low.
The reaction: Shares rose after the report.
