Logistics actual property funding belief Prologis introduced that it’s sticking with its preliminary 2025 outlook whilst uncertainty round commerce coverage has some prospects delaying leasing choices. The corporate mentioned favorable tendencies within the first quarter had it in place to boost steerage however “Liberation Day” tariffs introduced April 2 pressured it to pause that call.
Trying ahead, administration informed analysts on a Wednesday convention name that there are nonetheless many unknowns round near-term leasing demand however that longer-term fundamentals and the necessity for incremental warehousing house stay intact.
“Let’s be clear: The vary of outcomes is extensive. We see potential for a recession, inflation or probably each. And let’s additionally not dismiss the potential for a fast decision,” CFO Tim Arndt mentioned on the decision.
He mentioned the corporate was “designed to climate any atmosphere,” noting a various buyer portfolio, built-in hire escalators and a powerful steadiness sheet, however that “prospects merely lack a gentle backdrop upon which to plan their companies.”
Prologis (NYSE: PLD) reported first-quarter core funds from operations (FFO) of $1.42 per share earlier than the market opened on Wednesday, which was 4 cents above consensus and 14 cents larger yr over yr.
Complete income was up 9% y/y to $2.14 billion as new leases commenced elevated 35% to 65.1 million sq. ft, however occupancy slid 190 foundation factors to 94.9%. (Occupancy ended the interval at 95.2%.)
Arndt mentioned many purchasers have been pulling ahead inventories forward of tariffs and a few are actually searching for extra cupboard space. Port markets might additionally see a near-term elevate given a 90-day pause on some tariffs as prospects proceed to construct stockpiles.
Offers are nonetheless getting carried out presently however at a lowered tempo. General leasing exercise for Prologis was down 20% over the previous two weeks. It signed 80 leases overlaying 6 million sq. ft in that interval. Nonetheless, the corporate believes the necessity for house will improve in a “disconnected world” as many gamers will likely be required to face up new provide chains.
Prologis maintained its full-year 2025 steerage for core FFO to vary from $5.65 to $5.81. The outlook continues to imagine common occupancy in a spread of 94.5% to 95.5%. It did decrease its forecast for growth begins by 30% on the midpoint of the brand new vary of $1.5 billion to $2 billion till visibility improves.
The underside finish of the FFO steerage vary contemplated worst-case situations from previous downturns just like the Nice Monetary Disaster when rents fell 18% and vacancies declined 170 bps.