Prologis (PLD) Nareit REIT Week: 2024 Investor Conference summary

Unique business model and growth drivers

• Operates a 1.2 billion sq ft logistics portfolio across 20 countries and four continents, covering 75% of global GDP, with $216B in assets under management and a $105B equity market cap as of March 31, 2024.

• Growth is driven by a robust development pipeline, strategic capital business, and new business lines under Essentials, including energy and mobility.

• Energy business includes 540 MW of solar installed, with ambitions to reach 1.4-2GW of solar, storage, and charging, and $150-200M NOI in the long term.

• Essentials covers EV fleet charging and warehouse operating essentials, aiming to be a one-stop shop.

• Maintains a strong balance sheet and a culture-focused workforce of 2,600 employees in 85 offices.

Market conditions and customer trends

• Leasing activity has normalized after a slow Q1, with stable business conditions and 96% period-end occupancy.

• Customers, especially 3PLs, took excess space during COVID, leading to current market absorption.

• E-commerce demand remains strong, with major customers increasing leasing activity and e-commerce logistics space usage over three times that of brick-and-mortar.

• Inventory restocking is beginning, but some 3PLs still have 3%-4% excess space to work through.

• A significant drop in U.S. completions is expected by 2025, with a 64% decrease versus 2023, supporting continued rent growth as vacancy rates remain below 7%.

Portfolio performance and rent growth outlook

• Portfolio occupancy at 96% as of May, in line with forecasts.

• Positive rent growth expected over the next three years, though 2024 will be soft due to Southern California.

• 2023 rent growth was 6%-7% globally; 2024 expected at the low end of 4%-6% CAGR, with regional variation.

• Southern California recovery anticipated late 2024 into 2025, with supply and 3PL absorption as key factors.

• Business indicators show a 61.3% rent change on signings in May 2024; U.S. space utilization remains high at 85%.