Prologis Beats Estimates, Looks to AI Data Centers

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00:00Whether it's trade talks between U.S. and China, government shutdown, rare earth materials,

00:07minerals. What what do you really watch when it comes to some of these big macro issues?

00:14Well, thanks for having me. It's great to be here. Coming off this earnings call,

00:20this was certainly a topic for us. We had a tremendous quarter. As a matter of fact,

00:24we broke a record this quarter for leasing. We leased 62 million square feet of space

00:31throughout our 1.3 billion square foot portfolio. And you think about that in context,

00:3962 million square feet is the equivalent of leasing Central Park in Manhattan twice over again

00:46in one quarter. So our team working tirelessly around the world leased 1 million square feet

00:53a business day during the third quarter. And certainly these macro business trends

00:58are telling by our customers who are the front line of the economy.

01:03You look at the softer data and there is still some anxiety among a lot of business leaders about

01:08where things are headed. Maybe that's restricting them from making some of the CapEx expenditures

01:11that they would have otherwise. You're detailing for us very strong numbers. And I wonder what that

01:17says to you just about the capacity of these business leaders to look through or pass the

01:22uncertainty surrounding policy, including trade policy. Just give us a sense of the moment that

01:27we're in right now as you understand it from talking to your customers about how they're feeling about

01:31the business climate going forward.

01:33Sure. It's a great question. One of the things we're most proud of at Prologis is our customer

01:38franchise. We have unique proprietary data and we have unique relationships just given the size and

01:43scale of these relationships. And after what has really been two to three years of uncertainty,

01:48going back to rate hikes two and a half years ago, we see our customers actually getting off

01:54their back foot. What we've seen over this last quarter is actually customers moving from caution

01:59to optimism.

02:01Huh. Wow. Why? Because things are getting settled in terms of trade tariff? Like what is it that

02:09has calmed some of your customers?

02:12I think our customers realized after a couple sluggish years of not making many decisions

02:18that they have to make long-term decisions. And that's what they do when they do business with

02:22Prologis. And they have to look through the short-term noise in order to ensure that they're

02:26positioned for growth going forward.

02:28So you're talking about Amazon, Home Depot, FedEx, UPS, Giga Cloud Technology. I mean,

02:33these are some of your big customers. So you're talking about these guys are feeling more sure about

02:37the outlook than maybe they did over the last couple of years.

02:40Yeah, precisely. As a matter of fact, coming out of a cycle, we're really in just a classic

02:45real estate cycle right now. And what you're seeing typically at this point in the cycle is it's the

02:50big, well-capitalized customers that lead the way out of this part of the cycle.

02:56This is a basic question you'll forgive me for, but when we talk about warehouses, what are we talking

03:00about? Are these just simply places to store stuff or are they places where there's a lot of movement,

03:05a lot of products coming in and out? When we talk about sort of the bread and butter of your

03:08business, what are you building? What are you leasing out?

03:12Yeah, thanks for that question. We own nearly 6,000 buildings. These buildings are located in

03:1920 countries in markets that represent about 78% of the world GDP. As a matter of fact, in 2024,

03:26we had the equivalent of nearly 3% of the world GDP go through these buildings. Our focus in building

03:32this portfolio, curating this portfolio over the last 42 years is having the highest quality,

03:39best located logistics, real estate close to consumers.

03:44So where are you geographically building out the most? And where are you looking to kind of

03:51increase your square footage or buy properties or buy land?

03:54Well, the way we've set this organization up is our teams are calibrated to look for good deals

04:01around the world. And we're heavily focused, certainly this year, on build the suits with

04:07our customers. We're actually going to, we're on track for maybe our highest build the suit

04:11volume ever. And what does that mean? That means we have a contract in place with these customers

04:15before we start building for them. And we're seeing that broad based across most of the sectors,

04:22as well as geography spread throughout the world.

04:25I bet you can't do an interview without being asked about AI. So forgive me, we're going to do it.

04:29And I want to ask about it in two ways. The first is sort of how it's changing the way that you

04:32conduct your business. And then the second question is picking up on what Carol said, you

04:36looking at the demand for data centers, maybe changing your business tack as well. Where do you see

04:41opportunity as this revolution, as it's called, continues? And there's the need for more space

04:47for processing all of this data?

04:50Yeah, AI is here and it's big and it's big at Prologis. Certainly we have all sorts of

04:56different operational and tools that we're building to make our teams more efficient and to be able to

05:04help them move faster. But when you think of AI and Prologis, we announced today, we now have

05:115.2 gigawatts of power, either secured or in the advanced stages of being secured in sites,

05:18mostly tier one, tier two sites in the United States. And then the tier one markets called

05:23Flap D or the double M in Europe. So Prologis is now, we've long been in the higher and better

05:31use business. But again, given that footprint, we have close to these consumers. Well, the next wave

05:37in the modern economy is the digital economy. And AI and data centers are the logistics of that digital economy.

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