Prologis Beats Expectations With Record Leasing and Data Center Growth – Commercial Observer
The world’s biggest warehouse landlord is still full steam ahead on data centers.
“After several quarters of sustained demand, we believe the market is entering its next phase,” Prologis CEO Dan Letter said in a second-quarter earnings call Thursday afternoon.
The real estate investment trust (REIT) beat expectations in the second quarter of 2026, with record leasing and year-to-date data center starts already surpassing its full-year guidance.
“The same land, customer relationships and operating capabilities that have made us the leader in logistics are enabling our data center and energy businesses, creating two additional long-term growth opportunities for Prologis,” Letter said during the call.
The quarterly results come just six days before Prologis has a big decision to make. It must either make a formal offer to buy Segro, Britain’s biggest warehouse REIT and its international rival, or abandon its unsolicited bid. Segro’s board firmly rejected Prologis’ $16.6 billion all-share acquisition proposal in June. The company’s executives declined to take questions on the offer, but Letter told attendees that they’d put forward a “very compelling proposal.”
“It offers a meaningful premium to where the stock has traded, and values the business above its stated [net tangible assets],” Letter said. “Importantly, it gives Segro shareholders the opportunity to participate in the upside of a stronger combined company, and the value of the Prologis enterprise and everything it offers should not be overlooked.”
The news that the company leadership could share, however, was highly positive. Prologis reported core funds from operations (FFO) of $1.56 billion, up from $1.4 billion a year earlier and $1.44 billion last quarter. Net income reached $1.06 billion for the second quarter, nearly doubling from the $570 million reported in the same period of 2025, and up significantly from $980.5 million last quarter. Total revenue also grew annually, from $2.18 billion to $2.43 billion, and quarterly, by nearly 6 percent.
Between April and June, the REIT acquired $1.8 billion of new real estate and commenced $1.6 billion of new projects, Letter added during Thursday’s earnings call.
“The projects in our current power pipeline represent less than 1 percent of our global portfolio, underscoring the runway ahead,” Letter said.
Data center developments commenced this year have totaled $4 billion, including an $800 million, 260-megawatt build-to-suit data center campus. Prologis will continue its strategy of selling the assets upon completion, according to Letter. The growth of the REIT’s data center and energy investments is expected to boost the warehouse business, Letter said, but he acknowledged that rising negative sentiments toward data centers pose a risk.
“The approvals and entitlements continue to be a growing issue, and is certainly a meaningful barrier to supply,” Letter said.
Prologis’ U.S. tenants took up 66 million square feet more than they gave back last quarter, in the strongest three-month period of demand the company has seen since 2022. Vacancy fell 7.2 percent, and asking rents rose modestly.
Prologis reported that it signed a record 67 million square feet of leases during the second quarter, its fourth record in seven quarters. Leasing progress in the European market is even further along, said Tim Arndt, chief financial officer, with vacancy at 5.2 percent.
“Europe has been ahead of the U.S. with its market recovery now nearly 12 months in the making,” Arndt said.
As a result of the welcome quarterly progress, Prologis raised its full-year forecast for the second time this year. Management predicted demand outrunning supply in the U.S. market, with net absorption on pace to approach 220 million square feet against 195 million square feet of completed developments.
Emily Davis can be reached at edavis@commercialobserver.com.
