Release Date: April 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: It seems like occupancy and maybe pricing are coming in a little lower than you had previously expected. Could you go through how much or what pieces might be more macro driven and how much is certain markets weighing on the outlook?
A: (Christopher N. Caton - Prologis, Inc. - Senior VP & Global Head of Research) It's a combination of factors. Southern California and a few other high rent markets have seen subdued leasing velocity and rent growth below expectations. Additionally, there have been a couple of quarters of deferred decision-making, leading to aggregate customer demand across the United States being a bit below what was previously expected.
Q: Can you help flesh out maybe the timing of when some of these things became a little bit more evident?
A: (Hamid R. Moghadam - Prologis, Inc. - Co-Founder, Chairman & CEO) If you sense any acute change in our outlook, it's incorrect. We have a 3-year window for our expectations, and the first year has moved around. Our outlook for the second and third year remains essentially the same, potentially even better given how much deferred demand is building up.
Q: It sounds like demand has been pushed out -- or the rebound in the management pushed out a few quarters. What evidence do you have that would support that?
A: (Christopher N. Caton - Prologis, Inc. - Senior VP & Global Head of Research) The broader economy is generating a normal amount of demand. However, some customers have spare capacity they are utilizing to accommodate some of this growth. We need to see customers convert space requirements into signed leases, which is just beginning to happen with leading global e-commerce companies and other retailers.
Q: Can you comment on how much of the occupancy decline is just developments coming on a little bit less leased than maybe you had thought a couple of months ago?
A: (Hamid R. Moghadam - Prologis, Inc. - Co-Founder, Chairman & CEO) We like to be early and thoughtful in outlooks that we share. There's nothing going on in the portfolio that we're not sharing. This is just looking at the tone of the marketplace and sharing what we see playing out in the next 2 to 3 quarters.
Q: How conservative are the guidance levels, or could we see more downward revisions, for example, if you start to pull back on the capital deployment front?
A: (Hamid R. Moghadam - Prologis, Inc. - Co-Founder, Chairman & CEO) On capital deployment specifically, we don't have a budget or a plan for deploying capital. We look at every investment opportunity one at a time. All elements of our guidance, not just this period, should be taken with a grain of salt. We're not afraid to deploy a lot more or a lot less capital if the market conditions warrant it.
Q: Reduction in development starts for this year. Any additional information you could provide on what drove that, whether it was geographic-based or asset specific or build-to-suit pull back?
A: (Daniel Stephen Letter - Prologis, Inc. - President) We adjusted our guidance on development consistent with the adjustment in the occupancy and the operating pool. As we see demand shifting out, we just expect that we're going to start fewer buildings. We reduced it by about $0.5 billion, about half build-to-suit, half spec.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
