Prologis, a logistics warehouse operator, recently adjusted its 2024 guidance due to anticipated competition in leasing activity in certain markets. The company expects occupancy and net operating income to decrease as a result.
In the first quarter of 2024, Prologis reported core funds from operations (FFO) of $1.28, meeting consensus estimates. However, the company lowered its FFO guidance by 1% to a new range of $5.37 to $5.47, slightly below initial analyst expectations of $5.50.
According to Hamid Moghadam, co-founder and CEO of Prologis, while most markets are performing well, customers are focused on cost control, which is impacting leasing decisions and the pace of leasing activity.
Despite a 12% year-over-year increase in rental revenue to $1.83 billion, total consolidated revenue rose by 11% to $1.96 billion.
Occupancy across Prologis’ portfolio was at 96.8% in the last reporting period, slightly lower than the previous quarter and the previous year. The company’s 2024 outlook predicts average occupancy to be between 95.75% and 96.75%, reflecting a 75-basis point reduction at the midpoint.
Moreover, net effective rent change decreased by 120 basis points year over year, standing at 67.6%.
Moghadam acknowledged the challenges posed by a high interest rate environment and geopolitical uncertainties, affecting decision-making and net absorption. He expressed optimism about the company’s future prospects despite potential slowdowns in the near term.
Prologis’s stock price dropped by 5.6% on Wednesday compared to the S&P 500, which saw a 0.3% decrease. The company will hold a call to discuss its first-quarter results on Wednesday at noon EDT.
Overall, Prologis remains confident in its business fundamentals while preparing for potential challenges in the coming months.
