Industrial

Prologis Warns of Warehousing Market Slowdown Despite Strong Quarterly Revenue

Editorial staff

Editorial staff

— 1 min read
Prologis Warns of Warehousing Market Slowdown Despite Strong Quarterly Revenue
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As reported by The Wall Street Journal

The big picture: Prologis, the world’s largest industrial property company, reported better-than-expected revenue for the latest quarter but cautioned about a slowdown in the warehousing market as customers focus on reducing logistics costs. The logistics property giant cut its annual outlook after reporting stronger first-quarter revenue and earnings

Why it matters: The pandemic-driven surge in warehousing demand is waning due to shifts in consumer spending and tighter inventory controls by retailers and manufacturers, prompting Prologis to cut its annual guidance for 2024.

Key stats:

  • Q1 earnings: $584.3 million (63 cents a share), up from $463.2 million (50 cents a share) last year.
  • Revenue: Climbed to $1.96 billion from $1.77 billion, beating FactSet’s expected $1.84 billion.
  • 2024 earnings forecast: $3.15 to $3.35 a share, down from $3.20 to $3.45.
  • Core funds from operations forecast: $5.37 to $5.47 a share, down from $5.42 to $5.56.

Context: Prologis CEO Hamid Moghadam highlighted the cautious approach to leasing due to high interest rates, an uncertain retail economy, and geopolitical turmoil, despite strong indicators like GDP, retail sales, and e-commerce.

What they're saying: "It’s a very perplexing environment and one that I haven’t seen before. You have all the indicators of demand, whether it’s top-line GDP or retail sales or e-commerce sales, which are on fire, all pointing in the right direction. But people are not converting that into as much actual leased space." said Moghadam.

Industry insight:

  • Warehouse vacancy rate: Increased to 5.8% in Q1 from 5.2% the previous period (Cushman & Wakefield).
  • Price trends: Pricing for logistics properties has flattened after a surge from 2020 to 2023 (Savills, Cushman & Wakefield).

Company moves:

  • Major customers: Amazon and Home Depot continue to seek new space. Amazon plans to double same-day delivery sites, and Home Depot is adding warehouses for professional contractors.

Bottom line: Prologis navigates a complex market with strong revenue but faces challenges from cautious leasing behavior and a cooling warehousing demand.

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