Hamid Moghadam and Dan Letter

A clear and simple way to distinguish power in commercial real estate is by size, and Prologis — already one of the largest investment trusts in the nation — seems to have one mode: expand.

Hamid Moghadam and Dan Letter run the San Francisco-based REIT, which says it has 1.2 billion square feet of logistics space in 19 countries filled with about 6,700 tenants. One notable increase came last summer in a landmark $3.1 billion acquisition of Blackstone properties spread throughout major U.S. markets.

According to its first-quarter earnings report, Prologis expects to maintain 95.75 percent to 96.75 percent occupancy this year at its industrial facilities. The company also estimates another $500 million to $1 billion in acquisitions, and $800 million to $1.2 billion in asset sales. Just in the first three months of the year, Prologis took in $1.83 billion in rent and other revenue, which is $194 million more than the same period last year.

All this comes as the national industrial market faces corrections and capital cost headwinds. Moghadam said tenants are focused on controlling costs, which weighs on decision-making and leasing.

“The worst [vacancy] that we’re projecting in this period is almost as good as the best we’ve seen in other cycles,” Moghadam said during the quarterly earnings call. “We’ve just been spoiled by the market in three years where vacancies have been lower than they’ve ever been.”

Prologis plans to continue growing. Although it reduced its expectations on new development starts by about $500 million in response to the normalizing demand, Prologis still anticipates to make $2.5 billion to $3 billion in development starts this year.

“We have $38 billion worth of opportunity embedded in [our] land bank,” Letter explained during the earnings call. “We have entitlements. We have the teams. They’re all geared up, ready to start. We can literally pull the trigger on $10 billion,
$12 billion of that tomorrow.”