Is Prologis Stock a Wise Investment Amid Economic Uncertainty and Geopolitical Risks? A Comprehensive Analysis
Prologis (PLD) is a global industrial real estate company that specializes in the development and management of modern distribution facilities. The company has been performing well in recent quarters, driven by solid demand for its strategically located facilities. However, the current economic environment is causing some headwinds for the company's stock.
What's Aiding Prologis Stock?
Prologis provides industrial distribution warehouse space in some of the busiest distribution markets across the globe. The company's properties are typically located in large, supply-constrained infill markets in close proximity to airports, seaports, and ground transportation facilities, which facilitates rapid distribution of customers' products. This strategic location has driven healthy operating performance over the past several quarters, with new and renewal leases expected to translate into considerable rises in future rental income. Our estimate points to a year-over-year increase of 6.3% in rental revenues in 2025.
Prologis continues to bolster its presence in high-barrier, high-growth markets through strategic acquisitions and development activities. In the first quarter of 2025, the company's share of acquisitions amounted to $811 million. For 2025, the company anticipates acquisitions at Prologis share between $750 million and $1.25 billion. Development starts are expected in the range of $1.5-$2.0 billion.
Prologis maintains a healthy balance sheet position with ample flexibility. As of March 31, 2025, this industrial REIT had a total available liquidity of $6.52 billion. The company's credit ratings are A2 (Outlook Positive) from Moody's and A (Outlook Stable) from Standard & Poor's, enabling the company to borrow at an advantageous rate.
The demand for high-performing data centers is likely to increase in the coming years amid high growth in cloud computing, the Internet of Things (IoT), big data, and elevated requirements for third-party IT infrastructure. To capitalize on this growing opportunity, Prologis is focusing on both warehouse conversions and ground-up developments, which will aid future revenue growth.
What's Hurting Prologis Stock?
In a volatile and still elevated interest rate environment and geopolitical concerns, customers remain focused on cost controls and delaying their decisions with respect to leasing. As such, demand remains subdued, and this trend is expected to continue in the near term. Despite the Federal Reserve announcing rate cuts in the second half of 2024, the interest rate is still high and a concern for Prologis. The company's consolidated debt as of March 31, 2025 was $32.26 billion. For 2025, our estimate indicates an 11.7% year-over-year increase in the company's interest expenses.
Shares of Prologis have declined 6.2% over the past three months, underperforming the industry's fall of 1.2%.
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties (VICI) and W.P. Carey (WPC), each carrying a Zacks Rank #2 (Buy) at present. The Zacks Consensus Estimate for VICI Properties' 2025 FFO per share is pegged at $2.34, up 3.54% year over year. The Zacks Consensus Estimate for W.P. Carey's 2025 FFO per share is pegged at $4.88, up 3.83% year over year.
In conclusion, while Prologis has a solid operating platform and opportunities for growth, the current economic environment is causing some headwinds for the company's stock. Investors should consider both the positive and negative factors before making any investment decisions.
