Logistics warehouse operator Prologis said Wednesday that the market has turned and that key metrics like net absorption, occupancy and rents will improve throughout 2026. It noted on a quarterly call with analysts that vacancy rates have already peaked and rents are turning positive in some markets.

The San Francisco-based real estate investment trust said it achieved record lease signings in 2025, inking deals covering 228 million square feet of space, 20% of which were tied to the e-commerce sector. The company is currently seeing improved demand in all warehouse size categories.

Lease starts at Prologis represented 43.8 million square feet in the fourth quarter, a 6% year-over-year decline. Average occupancy fell 30 basis points y/y to 95.3%. However, the fourth quarter marked the highest rate of occupancy for Prologis’ portfolio in 2025. It said it outperformed the broader U.S. market by 300 bps during the year. (Occupancy was 95.8% to close the quarter.)

Net effective rent change on Prologis’ portfolio of multiyear leases was 43.8% in the quarter. Lease mark-to-market (resetting in-place rents to current market rents) was estimated at 18%, which equates to $800 million in future net operating income.

Prologis (NYSE: PLD) reported fourth-quarter consolidated revenue of $2.09 billion before the market opened on Wednesday, up 8% y/y and in line with analysts’ expectations. Core funds from operations (FFO) of $1.44 per share also matched the consensus estimate.

The company’s 2026 guidance calls for core FFO of $6.00 to $6.20 per share, which brackets the consensus estimate of $6.13. The guide assumes average occupancy in a range of 94.75% to 95.75% and development starts between $2.25 billion and $2.75 billion.

Management’s outlook assumes improvement in industry net absorption — leased space less the amount of space vacated.

Net absorption totaled 59 million square feet in the fourth quarter, outpacing facility competitions for the first time since 2022. Prologis expects net absorption of 200 million square feet in 2026 (compared to 155 million square feet last year) as new warehouse deliveries fall to 180 million square feet (from 200 million square feet last year). The changes are expected to lift vacancies from 7.4% to approximately 7.1% to 7.2%, placing upward pressure on rents throughout the year.

Net effective rent change on multiyear leases was 50% last year and is targeted at 40% this year.

Prologis said two-thirds of its 2026 development starts are in the U.S. and 40% of the projects represent data centers.

Shares of PLD were off 1.3% at 1:57 p.m. EST on Wednesday compared to the S&P 500, which was up 0.5%.

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