Key financial results

  • The company reported core FFO of $1.60 per share, or $1.61 per share excluding net promote expense.We delivered another excellent quarter with core FFO of $1.60 per share and $1.61 per share, excluding net promote expense.
  • Ending occupancy was 95.6%, which represents a 10 basis point increase from the second quarter.We ended the quarter with 95.6% occupancy, up 10 basis points from the second quarter
  • Rent change on rollover was 38% on a net effective basis, contributing $85 million of incremental NOI.Rent change on rollover was 38% on a net effective basis, adding $85 million of incremental NOI.
  • Same-store NOI growth was 5.7% on a net effective basis and 5.9% on a cash basis.In aggregate, we delivered same-store NOI growth of 5.7% on a net effective basis and 5.9% on cash.
  • The lease mark-to-market ended the quarter at 16%, representing $780 million of embedded NOI at spot rents.Our lease mark-to-market ended the quarter at 16%, representing approximately $780 million of embedded NOI at spot rents.

Business segment results

  • U.S. Logistics: U.S. net absorption totaled 63 million square feet, consistent with the normalized annual range of 230 million to 240 million square feet.
  • Data Center Supply Chain: The data center supply chain segment represented 17% of new leasing in the U.S. and 10% globally.This customer segment represented approximately 10% of our new leasing globally and 17% in the U.S. this quarter.
  • Europe: European market vacancy remained low at 5.3%, with market rents increasing 70 basis points during the quarter.Market vacancy has remained low at 5.3% and market rents increased 70 basis points during the quarter
  • Latin America: In Latin America, Brazil continues to lead performance, while the Mexico market is normalizing.Across Latin America, Brazil continues to lead, while Mexico is normalizing.
  • Japan: Japan is experiencing growing market rents aided by declining market vacancy in a higher rate and inflation environment.In Japan, it is noteworthy that the higher rate and inflation environment is translating to growing market rents aided by declining market vacancy.

Capital allocation

  • Development starts totaled $1 billion in the third quarter, bringing year-to-date starts to nearly $5 billion.We started $1 billion of development in the third quarter, bringing year-to-date starts to nearly $5 billion.
  • The company acquired $950 million of real estate during the quarter at an estimated 20% discount to replacement cost.We acquired $950 million of real estate during the quarter at an estimated discount to replacement cost of 20%.
  • Disposition activity totaled $310 million, with a year-to-date IRR spread between acquisitions and dispositions of 150 basis points.Our disposition activity totaled $310 million, and we continue to focus on the positive IRR spread we generate between acquisitions and dispositions, which now stands at 150 basis points year-to-date.
  • The company raised $2.4 billion of common equity during the quarter to support the SEGRO transaction.We also raised $2.4 billion of common equity during the quarter, completing an important part of the transaction's consideration.
  • Debt financing of $1.3 billion was closed during the quarter at an average rate of just under 4%.We closed on approximately $1.3 billion in debt financing at an average rate of just under 4% during the quarter.
  • Market rents for new construction are currently 27% above current market levels, which limits new supply.Today, the rents needed to justify new construction have expanded to 27% above current market levels.
  • U.S. market vacancy declined 10 basis points to 7.1%, and market rents increased 50 basis points.Market vacancy declined 10 basis points to 7.1% and market rents increased another 50 basis points, marking the third consecutive quarter of positive rent growth.
  • Transaction volumes are expected to moderate in the near term as buyers and sellers recalibrate due to interest rate changes.We expect transaction volumes to moderate in the near term as buyers and sellers recalibrate.
  • Management noted that logistics rents should grow above inflation over time in a balanced market.In a balanced market, logistics rents should grow above inflation over time.

Competitive landscape

  • Management stated that the company is capturing more than its fair share of the market through active portfolio management.Prologis has captured more than our fair share of the market, and this is both true nationally and Southern California with an active portfolio management approach.
  • The company believes its scale and access to capital provide opportunities that others cannot match.
  • Management did not provide specific details on competitor performance or market share figures.

Macroeconomic environment

  • The company holds approximately 95% of its debt on a fixed rate basis with an average life of 8 years.We are fortunate to hold approximately 95% of our debt on a fixed rate basis with approximately 8 years of average life remaining.
  • Recent increases in Treasury yields have created a wider bid-ask spread in the transaction market.Clearly, the market is now digesting the recent increase in Treasury yields, and we are observing a wider bid-ask spread.
  • Management noted that interest rate volatility is creating a period of transition where they are exercising caution.These are periods of transition where we exercise that caution and await some kind of new equilibrium and stable environment.

Growth opportunities and strategies

  • The company has a data center pipeline totaling 5.8 gigawatts, including 1.7 gigawatts of secured power.Our pipeline currently totals 5.8 gigawatts, including 1.7 of secured power and 4.1 in advanced stages.
  • The company owns or controls sites to develop the next $40 billion of logistics development.We own or control sites to develop the next $40 billion of logistics development with a highly capital-efficient land strategy.
  • Management expects build-to-suit projects to represent between 55% and 65% of total starts for the year.In total and for the year, we expect build-to-suits to represent between 55% and 65% of the year's starts.

Financial guidance and outlook

  • Average occupancy guidance is narrowed to a range of 95.25% to 95.50%.we are narrowing our forecast for average occupancy to a range of 95.25% to 95.50%.
  • Same-store NOI growth guidance is 5.5% to 6% on a net effective basis and 7% to 7.5% on a cash basis.
  • Strategic capital revenue is expected to be $650 million to $660 million, and G&A is expected to be $515 million to $525 million.
  • Development starts guidance is $6 billion to $6.75 billion, and acquisitions guidance is $2.1 billion to $2.3 billion.
  • Dispositions and contributions are expected to range from $3.5 billion to $4.75 billion.expect contributions and dispositions to range from $3.5 billion to $4.75 billion.
  • Net earnings are expected to be $4.05 to $4.15 per share, and core FFO is expected to be $6.25 to $6.29 per share.we expect net earnings to range between $4.05 and $4.15 per share, and core FFO is expected to range between $6.25 and $6.29 per share

SEGRO Transaction

  • SEGRO shareholders approved the combination, and the transaction is expected to close in the first half of 2027.we continue to expect it to close in the first half of 2027.
  • The combined entity will have a 368 million square foot operating portfolio in Europe.
  • Management did not provide specific details on cost or revenue synergies due to regulatory processes.all of that regulated process does keep us from speaking with any specificity to things like cost and revenue synergies and accretion.

Data Center Strategy

  • The company has letters of intent covering approximately 1 gigawatt of data center capacity, with starts expected in 2027.We are engaged with customers across the pipeline with letters of intent covering approximately 1 gigawatt, much of which we expect to start in 2027.
  • Management stated that the data center pipeline has not been impacted by moratoriums.the pipeline that we quote has not been impacted by moratoriums.
  • The company does not require joint venture funding for its data center business and has sufficient balance sheet capacity.we do not require any JV or other funding for this business. We've been happily executing on it on our own

Q3 2026 results

MetricResultChange
Core FFO (excluding net promote expense)$1.61 per shareNot stated
Same-store NOI growth (net effective)5.7%Not stated
Occupancy95.6%Up 10 basis points from Q2
Rent change on rollover (net effective)38%Not stated
U.S. net absorption63 million square feetNot stated

How management sounded

Balanced (+25 on our -100 to +100 scale). Management expressed confidence in operational fundamentals and the data center pipeline, though they acknowledged the challenging interest rate environment and exercised caution regarding capital deployment. Management sounded more upbeat than on 6% of the 302 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.

Read the analyst Q&A summary and guidance and outlook for this call.

What to watch before the next call

  • The closing of the SEGRO transaction, which is expected in the first half of 2027.
  • The impact of interest rate volatility on transaction volumes and asset values.
  • The progression of the 5.8 gigawatt data center pipeline and the conversion of LOIs into signed leases.

Earlier calls

  • Q2 2026 (Jul 16, 2026), tone Balanced: Prologis reported a record 67 million square feet of leasing activity and raised its full-year guidance, citing a market recovery and strong demand across logistics and data center segments.