Noting a slowing economy, management from logistics warehouse owner and operator Prologis said demand for space remains firm and leasing fundamentals are strong.
“With regard to our markets and leasing activities, the bottom line is that conditions remain healthy and there is little we see across our results or proprietary metrics that point to a meaningful slowdown,” CFO Tim Arndt told analysts Wednesday on the fourth-quarter earnings call.
Prologis (NYSE: PLD) reported core funds from operations (FFO) of $1.24 per share Wednesday before the market opened, 3 cents light of consensus but 12 cents higher year over year (y/y).
Occupancy across its portfolio was 98.2% in the period, with more than 99% of available space either leased or in negotiation. Leases commenced represented 42.5 million square feet of space, a 23% step down from the record pace established a year ago.
Rent growth was 5% in the fourth quarter, pushing full-year 2022 growth to 28%. Net effective rent change (over the entire lease term) was 50.6%, up nearly 18 percentage points y/y but 910 basis points lower than in the third quarter. However, the entirety of the sequential decline was tied to a change in mix and not indicative of softening market rents.
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John Shontz
As more companies move away from an extremely tight JIT inventory system, warehouse space will continue to demand a premium.