Prologis, a leading logistics warehouse operator, has slightly adjusted its 2024 guidance due to expectations of competitive leasing activity in certain markets. The company anticipates lower occupancy and net operating income in the coming year.
In its first-quarter 2024 financial report, Prologis reported core funds from operations (FFO) of $1.28, meeting analysts’ estimates. However, the company lowered its FFO guidance by 1% to a range of $5.37 to $5.47, falling short of the $5.50 analysts had initially forecasted.
According to Hamid Moghadam, Prologis’ co-founder and CEO, customers are focused on controlling costs, which is affecting decision-making and the pace of leasing. While operating conditions remain positive in most markets, this emphasis on cost control is influencing leasing activity.
Prologis saw a 12% year-over-year increase in rental revenue to $1.83 billion, contributing to an 11% rise in consolidated revenue to $1.96 billion. Occupancy across Prologis’ portfolio stood at 96.8% in the period, reflecting a 30-basis point decrease compared to the fourth quarter and a 120-basis point decline year-over-year. The company’s new 2024 outlook forecasts an average occupancy rate between 95.75% and 96.75%.
Net effective rent change over the entire lease term registered at 67.6%, representing a 120-basis point decrease year-over-year.
Moghadam expressed that a fluctuating and elevated interest rate environment, coupled with growing geopolitical concerns, is contributing to the indecision and its impact on net absorption. Nevertheless, the company remains optimistic about its business fundamentals and is prepared for a slower environment in the upcoming quarters.
Shares of Prologis (PLD) experienced a 5.6% decline at 11:44 a.m. EDT on Wednesday, outperforming the S&P 500, which recorded a 0.3% decrease. The company is scheduled to host a conference call on Wednesday at noon EDT to further discuss its first-quarter results.
