Prologis says new US warehouses need rents 27% higher before building pays
Prologis Research's November 3 report puts the rent a new US warehouse needs 27% above market rents, keeping supply scarce while the AI buildout widens demand. The world's largest warehouse owner is buying growth with its own shares instead, so funding has replaced demand as the swing factor.
Richard Tangthree-minute read
A new US warehouse needs rents 27% above today's market before construction covers its land, building and capital costs 12. Prologis+0.40% — Prologis, up 0.40 percent today Research, the in-house unit of the world's largest warehouse owner 5, published that number in its report on November 3 3, and trade press carried it this week 12. At today's rents a new building costs more than it earns, so new supply stays out of the market, and the scarcity pays the landlords who already own the space 1.
Compute demand now shows up in leasing data
The demand side starts with compute. Prologis chief executive Dan Letter says healthy demand is "supported by e-commerce, advanced manufacturing and the build-out of the data center supply chain" 4. Deals for data centers and power supply took 17% of new US leasing in the third quarter, and Prologis estimates the segment could create more than 150 million square feet of industrial demand through 2030 5.
Supply cannot answer at market rents. Expensive capital, limited land and slow power and water hookups keep speculative building out, and build-to-suit deals, where a tenant commits to a building before construction starts, made up 17% of 2026 development starts 13. Third-quarter absorption reached 63 million square feet, and vacancy contracted another 10 basis points 13. Market rents rose 1.5% over the first nine months, a third straight quarterly gain and still nowhere near what a new building requires 13.
Scarcity converts to cash for the landlord
Prologis, a real-estate investment trust, a company that owns property and pays out most of its income as dividends, is worth about $124 billion 3. It turns that position into cash: leases it began in the third quarter carry cash rents 23% above the ones they replaced 4. Average occupancy held at 95%, and revenue has climbed about 19% since mid-2024 410.
Prologis quarterly revenue has climbed from $2.0B to $2.4B while new building stays uneconomic
The landlord's top line compounds while construction math blocks new supply
Data
| Revenue | |
|---|---|
| Q2 '24 | $2.01B |
| Q3 '24 | $2.04B |
| Q4 '24 | $2.2B |
| Q1 '25 | $2.14B |
| Q2 '25 | $2.18B |
| Q3 '25 | $2.21B |
| Q4 '25 | $2.25B |
| Q1 '26 | $2.3B |
| Q2 '26 | $2.43B |
| Q3 '26 | $2.39B |
With domestic building uneconomic, growth is bought
Prologis raised its 2026 development-starts guidance to as much as $5.75 billion in October, carried by build-to-suit work 45. Growth beyond that is bought. A joint venture with Gaming and Leisure Properties, a casino landlord making its first investment outside gaming, will redevelop the 262-acre former Hollywood Casino site in Joliet, Illinois 6. Plans call for a warehouse park of more than 3.8 million square feet along Interstate 80, with Prologis as developer and options over the later phases 6. Prologis also paid $6.6 million for the shuttered water park next door 7.
The bigger purchase is SEGRO, a UK warehouse real-estate investment trust, whose shareholders approved Prologis' $18.8 billion takeover in October; closing is expected in the first half of 2027 5. The offer pays mostly in Prologis shares, with only a partial cash alternative 8. We reported the stock-funded bid on October 23; what is new this week is the supply math and the Joliet plan 8.
The bottleneck has moved to funding
Funding is now the link that limits the outcome. On top of the shares paying for SEGRO, Prologis filed a $5 billion at-the-market share program in late October, which we covered on October 31 9. Simply Wall St frames the trade plainly: heavy equity use can dilute existing holders, and it calls Joliet the clearest operational use of the money 9. Ad Hoc News puts the same mix of equity, debt and retained cash at the center of the case, with the full-year report and first 2027 outlook as the next catalyst 3.
Compute demand is showing up as industrial rent, and the rent goes to buildings that already exist. Prologis is doing the unglamorous work of turning a dead casino into freight-corridor capacity, and the scarcity math says that work earns its reward. Who funds it, today's holders or new ones, is the question the year-end report starts to answer.
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