Oct 15, 2026 earnings call — SEGRO combination and data center expansion
Core FFO guidance now expected between $6.25 and $6.29 per share for the year.
Revenue $2.4B (est $2.2B) · EPS $1.60 (est $0.78)
Key quotes
"Rent change on rollover was 38% on a net effective basis, adding $85 million of incremental NOI, and on a cash basis, rent change was 23%."
"Following completion, we will have a 363 million (sic) [ 368 million ] square foot operating portfolio in Europe with greater scale to serve customers and a broader set of development opportunities across logistics and data centers."
"We are engaged with customers across the pipeline, with letters of intent covering approximately 1 gigawatt, much of which we expect to start in 2027."
Analyst Q&A 13
vacancy and rent pricing
Q (Michael Goldsmith · UBS): How quickly can vacancy tighten if absorption stays around current levels, and when will that show up as stronger pricing power?
A: Management said it is early to give a 2027 forecast but the facts are constructive. Net absorption has been running at 240 million square feet annualized, vacancy moved from 7.5% to 7.1% and is on pace to reach 7% by year end; some markets already show 5% to 6% rent growth.
"It's on pace to go to 7% by the end of the year." — Christopher Caton
development starts versus higher standards
Q (Michael Griffin · Evercore): You raised the bar for new development but modestly increased starts guidance. How do you reconcile that? Are you better positioned to execute developments now?
A: They said this quarter was a strong spec quarter, with 80% of starts in spec. They expect to end the year 55% to 65% build-to-suits, and the build-to-suit pipeline is about 20% to 25% larger than a year ago, so a big fourth quarter is expected.
"we expect to end the year at 55% to 65% of the year in build-to-suits." — Dan Letter (CEO)
occupancy guide change and rent growth markets
Q (Vikram Malhotra · Mizuho): Why did the top end of the occupancy guide tick down, and how confident are you in occupancy building into 2027? Where are you seeing sustained mid-single digit rent growth?
A: They said the occupancy change is a tightening of the range as fourth quarter comes into focus, and they feel good about further occupancy build through the fourth quarter. They pointed to U.S. markets seeing mid-single-digit rent growth: Dallas, Houston, Atlanta, Phoenix, Indianapolis and Northern California, and also noted momentum in Brazil and the Netherlands.
"So market rent, I hit many of the American markets that are enjoying that sort of mid-single digits rent growth." — Christopher Caton
buying assets with slower mark-to-market upside
Q (William Catherwood · U.S. Bancorp -- BTIG): Given lower going-in cap rates on acquisitions and rent growth expectations, will you buy assets where mark-to-market upside is further out, and how does that affect opportunity pool and returns?
A: They said capital allocation is around total return and their large balance sheet and access to capital let them deploy where others can't. If they can get the right discount to replacement cost and right quality, and apply their usual discipline, they'll find opportunities; the quarter's activity was driven in large part by one such deal with high lease mark-to-market.
"we do have confidence that if we get the right discount to replacement cost, the right quality, take it through all the same filters, using the same discipline that we've always used, we'll certainly find more opportunities there." — Dan Letter (CEO)
acquisitions versus dispositions guidance
Q (Caitlin Burrows · Goldman Sachs): Why did acquisition guidance increase while contributions and dispositions were revised down? What drove those directional differences?
A: They said the higher acquisitions guidance largely reflects what they've executed to date and a narrow range for the rest of the year. The lower disposition and contribution guidance reflects caution amid volatile interest rates and timing delays for a couple of deals that may push into the new year.
"The disposition and contribution guidance just reflects a little bit of caution and our willingness to be careful if there is some turbulence in pricing from here as the interest rate environment has been so volatile." — Timothy Arndt (CFO)
development cap rate change explanation
Q (Vince Tibone · Green Street): The weighted average stabilized cap rate on active developments rose 20 basis points to 5.7%. Is that change a view of market cap rates or driven by other factors?
A: They said they regularly review pricing and valuations for the development pool and the figure reflects what they see as the terminal value upon stabilization. Their underwriting already builds in cost of capital, expected cap rate expansion and execution risk, so many moving parts affect the number.
"But that is a reflection on what we see the terminal value of that real estate will be upon stabilization." — Dan Letter (CEO)
data center LOIs and signing constraints
Q (John Kim · BMO): You reported about 1 gigawatt in LOIs. What constraints are keeping those leases unsigned—power/permitting or leasing economics?
A: They said every deal is different and negotiations with hyperscalers are long; pace of power and entitlements matters and these projects are multi-year. They have started over $2 billion of data centers this year, call the business lumpy, and stated confidence they will deliver the 1 gigawatt and 5.8 gigawatts over five years; starts and LOIs are being refilled steadily.
"We're talking with confidence about delivering that 1 gigawatt right there." — Dan Letter (CEO)
Southern California submarket differences
Q (Nicholas Yulico · Scotiabank): Can you describe performance differences across Southern California submarkets like South Bay, advanced manufacturing/defense areas, Los Angeles and Inland Empire?
A: They said Southern California is recovering: net absorption is positive and market occupancy is up year-on-year to 93.5%, with Prologis nearly 97% occupied. Rents are stable but vary by submarket and product quality; Inland Empire is very healthy and South Bay Class A is strong in aerospace, and overall portfolio quality and active management position them to capture market share.
"In fact, I'd point to Prologis being nearly 97% occupied." — Christopher Caton
turnover costs and concessions trend
Q (Nicholas Thillman · Baird): Is the quarter's uptick in turnover costs a mix issue, and have concessions topped out across the U.S. portfolio?
A: They said turnover cost is mostly a mix issue driven by new leasing and occupancy builds. The presented free rent metric is on a trailing 12-month basis, but sequentially free rent declined as a percent of lease value quarter-over-quarter; they expect it will bounce but trend toward closer to 3% over the longer term.
"When you unpack it sequentially, the free rent level actually declined as a percent of lease value quarter-over-quarter." — Timothy Arndt (CFO)
what's driving current demand
Q (Michael Carroll · RBC): What is driving the current demand outlook—are higher rates holding back traditional industrial demand, and is data center and e-commerce demand offsetting that?
A: They said customer conversations are constructive and the best lens is their proprietary customer data. Net absorption is in the 230 million to 240 million square foot range, with an outsized percentage of demand from the data center build-out; some interest rate-sensitive segments are slower, but the pipeline continues to replenish and they believe they're capturing more than their fair share of leasing.
"We're certainly seeing an outsized percentage of demand in the data center build-out." — Dan Letter (CEO)
SEGRO deal timing and guidance inclusion
Q (Blaine Heck · Wells Fargo): Does movement in rates affect SEGRO deal economics, and will initial 2027 guidance include SEGRO or exclude it?
A: They said they cannot discuss transaction specifics beyond being pleased with the quarter's outcome and that regulatory steps remain. The vast majority of the transaction capitalization is known (share exchange), an equity raise is in place, some assumed debt has fixed interest rates, and they do not expect inaugural guidance will include SEGRO because they do not expect it to have closed by then.
"I do not anticipate that inaugural guidance will include specifics on SEGRO because we don't expect it will have closed by then." — Timothy Arndt (CFO)
data center moratoriums, demand, and funding
Q (David Rodgers · Raymond James): Are data center moratoriums or legislation impacting your secured power pipeline, is the 17% ancillary demand number changing, and does this affect your JV or funding plans?
A: They said the quoted pipeline has not been impacted by moratoriums and they set a high bar before pulling any power; pauses may slow projects by months but have not materially affected their pipeline and 85% of the 5.8 gigawatts can start by 2030. The 17% share of new leasing tied to data center suppliers is strengthening, and while they have structures available, they do not require JVs to fund this business and have balance sheet capacity to proceed on their own.
"But overall, the pipeline that we quote has not been impacted by moratoriums." — Dan Letter (CEO)
return requirements and data center underwriting
Q (Todd Thomas · KeyBanc): Have higher rates raised required returns for acquisitions and developments, and has underwriting for data center tenant credit or required returns changed?
A: They said cost of capital is uncertain and volatile, so they add reserves in underwriting during transition periods and are exercising caution while awaiting a new equilibrium; they believe they can create value in operations and development across yield environments. For data centers, markets are still forming, rates matter, and they build buffers into risk-adjusted returns for terminal value, execution, construction and supply chain risks, preserving margins and adjusting returns as needed.
"Given where that overall market is, what we build buffers into these risk-adjusted returns, whether it be the ultimate terminal value, the execution risk, construction risk, supply chain risk." — Dan Letter (CEO)