Prologis Earnings Report 01/21/26 Takeaways
What can we learn from the Prologis Q4 2025 earnings call Wednesday? They are the largest, most forward leaning industrial real estate platform in the country with 556 So Cal industrial assets, along with hundreds of properties across New York/New Jersey, Nor Cal, Chicago, DFW, South Florida, Atlanta, Houston Seattle, Baltimore for starters. I decided to go with a glass half full and glass half empty lens approach here since we are at an inflection point that is tenuous where we are still looking for multiple quarters of continuous improvement to materialize, so a balanced view is most insightful.
-- The Supply Story * Glass Half Full: Prologis highlighted that new deliveries are forecasted to decline from approximately 200M SF in 2025 to 180M SF in 2026. For the first time since 2022 net absorption has exceeded completions. * Glass Half Empty: Despite the slowdown in new builds, vacancy remains sticky. It sits around 7.4%, and even with fewer deliveries, is only expected to tighten modestly to 7.1%–7.2% by the end of 2026. We are chipping away at the vacancy overhang with a spoon, not a shovel. * The Takeaway: Supply is improving structurally, but it is not disappearing
-- The Demand Story * Glass Half Full: Prologis expects total U.S. net absorption to improve from approximately 155 million square feet in 2025 to approximately 200 million square feet in 2026. E-commerce reemerged as a meaningful driver, representing 20% of new leasing, its strongest year since 2021. They noted a tone shift in Southern California, with positive absorption returning and pricing firming "in parts" of the Inland Empire. * Glass Half Empty: If leasing volume is at record levels, why isn’t vacancy falling faster? One explanation is churn as a meaningful portion of activity reflects portfolio optimization rather than net growth. Market rents were under pressure across much of 2025. * The Takeaway: Demand is moving in the right direction, albeit slowly. Much of the activity appears to reflect tenants rightsizing, consolidating, or upgrading rather than pure net expansion. Prologis' 78% lease renewal rate reinforces that tenants stay when they can rationalize their footprints.
-- The X Factor * The Takeaway: Approximately 40% of Prologis’ 2026 global development starts are targeted toward data centers. In my two trips to Phoenix this month I counted no fewer than five large data center projects along the 303 corridor alone. * Why this matters: With a 5.7 GW power pipeline, Prologis is showing that land with access to power is becoming increasingly valuable. Logistics remains the foundation, but land and capital that historically supported warehouse development are also increasingly being allocated to digital infrastructure. * The Reality: Traditional industrial supply is becoming more structurally constrained, not just by zoning or entitlement, AB98 in California, but also by energy availability.
The full results, supplemental financials reports (abriged version below), earnings webcast, and investor fact shield are available here .
This fitting of the macro trends down to the micro market is where we can help you turn strategy into tactics. Let us know if you would like a lease or sale property evaluation that is highly specialized to your property and situation.
Justin
Justin Smith, SIOR 949.400.4786 jbsmith@lee-associates.com (mailto:jbsmith@lee-associates.com)
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