Prologis, the world's largest warehouse landlord, continues to vigorously pursue its data centre activities. CEO Dan Letter commented during an earnings call for the second quarter on Thursday afternoon: "After several quarters of sustained demand, we anticipate the market entering its next phase."
The Real Estate Investment Trust (REIT) exceeded expectations in the second quarter of 2026 with record leases and data centre projects already underway, which are surpassing its own annual forecast. Letter explained that the same land, customer relationships, and operational capabilities that made Prologis the leading provider in logistics would now also enable the data centre and energy businesses, creating two additional long-term growth opportunities for the company.
The quarterly results were released six days before a crucial decision for Prologis. The company must either make a formal offer to acquire Segro, Britain's largest warehouse REIT and international competitor, or withdraw its initially unsolicited offer. Segro's board had decisively rejected Prologis's $16.6 billion acquisition offer (an all-share acquisition) in June. Prologis executives declined to answer questions about the offer. However, Letter emphasised that they had put forward a "very compelling proposal."
Financial Performance and Strategic Growth
Letter elaborated that the offer provided a significant premium to the previous share price and valued the business above its reported net tangible assets. He highlighted that Segro shareholders would have the opportunity to participate in the value of a stronger combined company, and the value of the Prologis enterprise and all associated benefits should not be overlooked.
The information management was able to share was extremely positive. Prologis reported Core Funds From Operations (FFO) of $1.56 billion, an increase from $1.4 billion in the prior year and $1.44 billion last quarter. Net profit reached $1.06 billion in the second quarter, almost doubling from $570 million in the same period of 2025 and significantly exceeding $980.5 million in the previous quarter. Total revenue also increased annually from $2.18 billion to $2.43 billion and quarterly by almost 6 percent.
Between April and June, the REIT acquired new properties worth $1.8 billion and commenced new projects valued at $1.6 billion. Letter added during the earnings call that the projects in the current power pipeline represented less than 1 percent of the global portfolio, underscoring future potential. Data centre developments started this year amounted to a total of $4 billion, including an $800 million, 260-megawatt data centre campus developed as a build-to-suit project. According to Letter, Prologis will continue its strategy of selling assets upon completion.
Market Dynamics and Outlook
The growth of the REIT's data centre and energy investments is expected to boost the warehouse business. However, Letter acknowledged that the increasingly negative sentiment towards data centres posed a risk. Permissions and entitlements continued to be a growing problem, forming a significant barrier to supply.
Prologis's US tenants occupied 66 million square feet more than they returned last quarter – the strongest three-month period of demand the company has experienced since 2022. The vacancy rate fell by 7.2 percent, and asking rents increased moderately. Prologis reported signing a record 67 million square feet of leases in the second quarter, representing the fourth record in seven quarters.
Leasing progress in the European market is even more advanced, according to Tim Arndt, Chief Financial Officer, with a vacancy rate of 5.2 percent. Arndt noted that Europe had been ahead of the US in its market recovery, which has now lasted for almost 12 months. As a result, Prologis raised its annual forecast for the second time this year. Management predicted that demand in the US market would exceed supply, with net absorption expected to reach 220 million square feet, compared to 195 million square feet of completed developments.
