Q2 2025 Prologis Inc Earnings Call

Greetings and welcome to the pro. Louis second quarter 2025 earnings conference call at this time, all participants are not listening. Only move a question and answer session will follow the former presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host abishek castillia directive and rest your relations. Thank you. You may begin.

And good morning, everyone. Welcome to our second quarter 2025 earnings conference call. The supplemental document is available on our website at Prologis.com under Investor Relations.

I'd like to state that this conference call will contain forward looking statements under federal securities laws. These statements are based on current expectations, estimates and projections about the market and the industry in which Prologis operates, as well as management's beliefs and assumptions. Forward-looking statements are not guarantees of performance, and actual operating results may be affected by a variety of factors. For a list of those factors, please refer to the forward-looking statement notice in our 10-K or other SEC filings.

Speaker Change: Thanks Molly and good morning everyone. Welcome to our second quarter 2025 earnings conference call. The supplemental document is available on our website at prologis.com under investor relations. I'd like to state that this conference call will contain forward-looking statements under Federal Securities laws. These statements are based on current expectations estimates and projections about the market and the industry in which prologic operates as well as Management's beliefs and assumptions.

Speaker Change: We're looking statements are not guarantees of performance and actual operating results. May be affected by a variety of factors.

Additionally, our second quarter earnings press release and supplemental do contain financial measures such as FFO and EBITDA that are non-GAAP, and in accordance with Reg G, we have provided reconciliation to those measures.

Speaker Change: For a list of those factors, please refer to the forward-looking statement notice in our 10K or other SEC filings.

I'd like to welcome Tim Arndt, our CFO, who will cover results, real-time market conditions, and guidance. Hamid Moghadam, our CEO, Dan Letter, President, and Chris Caton, Managing Director, are also with us today.

Speaker Change: Additionally, our second quarter, earnings, press release and supplemental. Do contain Financial measures such as ffo and IBA that are non-gaap. And in accordance with Reggie, we have provided a Reconciliation to those measures.

With that, I will hand the call over to Tim. Thanks, Abhishek. Good morning, everybody, and thank you for joining our call. The second quarter exceeded our expectations, reflecting the strength and versatility of our team and portfolio in a challenging environment. Against a backdrop of subdued net absorption and a modest rise in market vacancy, we outperformed our occupancy expectations and the markets, delivered meaningful rent change and same-store growth, and achieved another strong quarter and build-to-suit activity, including continued momentum in our data center business. If we were to sum up the mindset of many of our customers, particularly our largest ones, we'd say that they are increasingly looking past the headlines and what has been an evolution of their thinking over the last few months as those headlines constantly change.

I'd like to welcome Tim orange our CFO, who will cover results real time market conditions and guidance Hamid. Moghadam our CEO, Dan letter president and Chris. Kaitlyn managing director. Also with us today. With that, I will hand the call over to Tim

Tim: Thanks, Robert check. Good morning everybody, and thank you for joining our call.

Tim: The second quarter, exceeded our expectations, reflecting the strength, and versatility of our team and portfolio in a challenging environment.

Tim: Against a backdrop of subdued, net absorption and a modest rise in Market vacancy. We outperformed our occupancy expectations and the markets delivered. Meaningful rent. Change in same store growth and achieved another strong quarter and build the suit activity. Including continued. Momentum in our data center business.

While net absorption has been muted, new leasing is occurring and customer interest is promising as reflected in the aggregate size of our leasing pipeline. That same momentum is also apparent in our Build to Suit activity, which continues to grow and is well diversified across geographies and customer segments. At the same time, the supply pipeline is depleting and development starts in our markets remain low, setting the stage for favorable conditions as demand improves. This together with the over 20% spread we see between market and replacement cost rents are important precursors to the next cycle of market rent growth.

Tim: if we were to sum up the mindset of many of our customers, particularly our largest ones, we'd say that they are increasingly looking past the headlines and what has been an evolution of their thinking over the last few months as those headlines constantly change

While net absorption has been muted, new leasing is occurring. And customer interest is promising as reflected in the aggregate size of our leasing pipeline.

That same momentum is also apparent in our bill to suit activity which continues to grow and is well Diversified across geographies and customer segments.

Tim: At the same time, the supply pipeline is depleting and development starts in our markets. Remain low setting the stage for favorable conditions as demand improves.

Turning to our results, Core FFO including net promote income was $1.46 per share and excluding net promotes was $1.47 per share, each ahead of our forecast. Occupancy ended the quarter at 95.1%, down just 10% sequentially, and further widening our outperformance to the market, now at 290 basis points. We continue to unlock our lease market market by delivering strong rent change across the global portfolio. During the quarter, we monetized an additional $75 million of NOI through rent change, which was 53% on a net effective basis and 35% on cash. The net of this puts our lease market to market at 22% at quarter end.

Tim: This together with the over 20% spread, we see between market and replacement cost rents are important precursors to the next cycle of Market. Rent growth,

Tim: Turning to our results. Coref Pho, including net, promote income was a $1.46 per share, and excluding that promotes was a $1.47 per share. Each ahead of our forecast.

Percent down just 10% sequentially and further widening our outperformance to the market. Now with 290 basis points,

We continue to unlock our lease Mark to Market by delivering strong rent, change across the global portfolio.

Tim: During the quarter, we monetized an additional 75 million of noi through rent, change which was 53% on a net effective basis and 35% on cash.

The net of this puts our lease Mark to Market at 22% at quarter end.

Net effective and cash same store growth during the quarter were 4.8 and 4.9% respectively. As a reminder, fair value lease adjustments, which are non-cash and driven from the purchase accounting related to our 22 and 23 M&A, continue to drag our net effective same-store and bottom-line earnings growth by approximately 100 basis points. In terms of capital deployment, we started over $900 million in new development starts, nearly 65% of which was build-to-suit activity across seven additional projects in both the U.S. and Europe. Beyond this activity, we have signed agreements for an additional three Build-A-Suits post-quarter end. Our Build-A-Suit starts for the first half total $1.1 billion, which is the largest start to a year that we have ever had.

Tim: Net effective and cash. Same store growth. During the quarter were 4.8 and 4.9% respectively.

Tim: As a reminder fair value lease adjustments, which are non-cash and driven from the purchase accounting related to our 22 and 23. M&a continue to drag our net effective same store and bottom lines earnings growth by approximately 100 basis points.

In terms of capital deployment, we started over 900 million dollars in new development starts, nearly 65% of which was built to suit activity across 7 additional projects in both the US and Europe.

Beyond this activity, we have signed agreements for an additional 3 build the suits post quarter end

The strong demand by some of our biggest customers underscores our observation that many of them are moving beyond the noise and making significant capital investments into their business. $300 million of the starts relate to an incremental investment in our ongoing data center development in Austin, Texas, with a top hyperscaler. In addition to our growing development volume, we continue to procure power, adding another 200 megawatts to our advanced stages category, bringing that total to 2.2 gigawatts. As a reminder, we have an additional 1.1 gigawatt fully secured, plus 300 megawatts currently under construction. Finally, in our energy business, we continue to make steady progress toward our goal of one gigawatt of solar production and storage by year end, with nearly 1.1 gigawatts either in operation or under development today.

Tim: Our bill, the suit starts for the first half total 1.1 billion dollars, which is the largest start to a year that we have ever had.

Tim: The strong Demand by some of our biggest customers, underscores our observation that many of them are moving beyond the noise and making significant Capital investments into their business.

Tim: $300 million of the starts relate to an incremental investment in our ongoing data center. Development in Austin, Texas with a top hyperscaler.

Tim: In addition to our growing development volume, we continue to procure power adding another 200, megawatts to our Advanced stages category, bringing that total to 2.2 gigawatts.

As a reminder, we have an additional 1.1, gigawatt, fully secured plus 300 megawatts, currently under construction.

While recent legislative changes in the U.S. will reduce the incentives for new projects over time, we expect the consequential upward pressure on energy prices to uphold return. On a go-forward basis, we still see meaningful opportunity in the U.S. and remain committed to and are excited about the broader global potential of our distributed energy platform, which is expanding in its capabilities and offerings. On the balance sheet, we closed on $5.8 billion in financing activity, which included the $3 billion recast of one of our three Prologis global credit lines at a reduced spread. This facility contributes to the over $7 billion of liquidity we held at quarter end.

Tim: Finally, in our energy business, we continue to make steady progress toward our goal of 1, gigawatt, of solar production and Storage by year. End with nearly 1.1 gigawatts, either in operation or under development today,

Tim: while recent legislative changes in the US, will reduce the incentives for new projects over time.

We expect the consequential upward pressure on Energy prices to uphold returns.

Tim: On a go forward basis. We still see meaningful opportunity in the US and remain committed to and are excited about the broader Global potential of our distributed energy platform, which is expanding and its capabilities and offerings.

Tim: On the balance sheet, we close on 5.8 billion in financing activity. Which included the 3 billion dollar recast of 1 of our 3 prologis Global Credit lines at a reduced spread

We also expanded our commercial paper program this quarter, adding a 1 billion euro facility, which should generate an additional 40 to 60 basis points of savings in line with our experience in the U.S. Our strategic capital business saw net outflows in our open-ended vehicles during the quarter of approximately $300 million. Beyond our existing vehicles, our teams are at work developing new offerings more representative of the breadth of our activities, which we look forward to reporting further on in coming quarters.

Tim: This facility contributes to the over 7 billion dollars of liquidity. We held at quarter end. We also expanded our commercial paper program, this quarter adding a 1 billion Euro facility, which should generate an additional 40 to 60 basis points of savings in line with our experience in the US.

Tim: our strategic Capital business, saw net outflows, and our open-ended Vehicles, during the quarter of approximately $300 million,

Tim: Beyond our existing vehicles, our teams are at work, developing new offerings, more representative of the breadth of our activities which we look forward to reporting further on in coming quarters.

Let me now spend a few moments describing our markets and experience with customers this quarter. To level set, market rents declined approximately 1.4% during the quarter, and values were essentially flat. In the U.S., net absorption was subdued at 28 million square feet, and market vacancy ticked up 10 basis points to 7.4%. Operationally, we continue to see customers recalibrating, not retreating, and remaining active in signing leases, even if at a slower pace. While the full quarter of activity was modestly below normal, leasing velocity did accelerate over the months of the quarter, with June indeed the strongest.

Tim: Let me now spend a few moments describing our markets and experience with customers this quarter.

Tim: To level set Market rents declined, approximately 1.4% during the quarter and values were essentially flat in the US. Net absorption was subdued at 28 million square feet and Market, vacancy ticked up 10 basis points to 7.4%

Tim: Operationally, we continue to see customers recalibrating, not retreating and remaining active in signing leases, even if at a slower pace.

As has been the case for some time, renewal activity has been very healthy, while new leasing remains slow. We're not surprised by the dynamic, given the larger investment and more deliberate nature of new leasing, but we're encouraged by a series of data points across our proprietary metrics and customer dialogue, which suggests that demand is piling up and could improve greatly with some clarity out of policy and the effect it's having on the backdrop. Of those data points, first would be from the sentiment implied by our leasing pipeline, which stands at 130 million square feet, reaching historically high levels in recent weeks.

While the full quarter of activity was modestly below normal leasing velocity did accelerate over the months of the quarter with June indeed, the strongest.

Tim: As has been the case, for some time, renewal activity, has been very healthy. While new leasing remains slow, we're not surprised by the dynamic, given the larger investment in more deliberate nature of new leasing. But we're encouraged by a series of data points or proprietary metrics and customer dialogue, which suggests that demand is piling up and could improve greatly with some clarity out of policy and the effect it's having on the backdrop.

We see it as reflecting both a significant interest and need for space, as well as a lengthening of the time and decision making, which we expect to see show up in future quarters through longer gestation timing as deals get made. It's also clear that utilization both of gray space and within 3PL capacity is rising. Our Build-A-Soup pipeline remains full, with over 30 projects representing more than 25 million square feet in active dialogue. This level of activity underscores how larger customers, with the resources and scale to think long-term, are being strategic, consolidating operations, and positioning for growth.

Of those data points. First would be from the sentiment implied by our leasing pipeline which stands at 130 million square ft. Reaching historically high levels in recent weeks,

Tim: we see it as reflecting both the significant interest and need for space as well as a lengthening of the time and decision-making which we expect to see show up in future quarters through longer gestation timing as deals get made.

Tim: It's also clear that utilization, both with gray space and within 3pl capacity is rising.

Finally, our broader customer dialogue simply reflects an emerging bias towards action, summarized well by one prominent user describing the exhaustion of adapting to shifting tariffs, and concluded that they need to just run their business and will, quote, figure out the tariff details when there is some clarity. All told, while we expect conditions to remain choppy over the next few quarters, the market is holding up reasonably well. Looking ahead, consistent policy and settled trade arrangements will certainly help and be a key determinant of the overall pace of net absorption.

Tim: Our build is 2 pipeline remains full with over 30 projects representing more than 25, million square feet in active dialogue. This level of activity, underscores, how large our customers with the resources and scale to think long term are being strategic, consolidating operations and positioning for growth?

Tim: Finally, our broader customer dialogue, simply reflects an emerging bias towards action, summarized, well, by 1 prominent user describing, the exhaustion of adapting to shifting tariffs, and concluded that they need to just run their business and will quote figure out the Tariff details when there is some clarity.

Tim: All told while we expect conditions to remain choppy over the next few quarters, the market is holding up reasonably well.

Tim: Looking ahead, consistent policy and settled, trade Arrangements. Will certainly help and be a key determinant of the overall pace of net absorption.

Turning to guidance, in contrast to the uncertainty we faced in early April, we now see enough stability in the balance of the year to narrow and increase our guidance. Average occupancy at our share will range between 94.75% and 94.25%. Rent change should remain strong through the second half and average in the low to mid 50s for the full year. Same-store NOI growth will range between 3.75% and 4.25% on a net effective basis and 4.25% to 4.75% on a cash-based basis. We are maintaining our GNA guidance of $450 to $470 million and increasing our strategic capital revenue guidance to a range of $570 to $590 million.

Tim: Turning the guidance and contrast to the uncertainty we face in early April.

Tim: We now, see enough stability in the balance of the year to narrow and increase our guidance, average occupancy at our share, will range between 94, and 3/4, and 94, and a quarter percent.

Tim: Rent change would remain strong through the second half and average in the low to mid-50s for the full year.

Tim: Same store. Noi growth will range between 3 and 3/4 and 4 and a quarter percent on a net effective basis and 4 and a quarter to 4 and 3/4% on a cash basis.

In Capital Deployment, we are largely holding the range for net sources and uses in the year, but increasing guidance within the offsetting categories. Most notably, we are increasing development starts at our share to a new range of $2.25 to $2.75 billion, which is reflective of the additional data center start not previously guided, as well as improved visibility and logistics starts due largely to our Build to Suit success. We expect to keep up a historically higher mix of build-to-suits over the balance of the year, and as a reminder, future data center starts are not a component of this guidance.

Tim: We are maintaining our GNA guidance of 450 to 470 million and increasing our strategic Capital Revenue. Guidance to a range of 570 to 590 million.

Tim: In capital deployment, we are largely holding the range for net sources and uses in the year.

But increasing guidance within the offsetting categories, most notably we are increasing development. Starts at our share to a new range of 2.25 to 2.75 billion, which is reflective of the additional data center. Start not previously guided as well as improved visibility and Logistics starts. Due largely to our bill to suit success.

We are also increasing our combined disposition and contribution guidance to a range of $1 billion to $1.75 billion, again at our share.

We expect to keep up a historically higher mix of build the suits, over the balance of the year. And as a reminder future data center starts are not a component of this guidance.

Tim: we are also increasing our combined disposition and contribution guidance to a range of 1 billion to 1.75 billion again at our share

In total, our GAAP earnings guidance calls for a range of $3 to $3.15 per share. Core FFO including Net Promote Expense will range between $5.75 and $5.80 per share, while Core FFO excluding Net Promote Expense will range between $5.80 and $5.85 per share, a four and a half cent increase from our prior guidance. The higher midpoint is predominantly due to higher NOI and strategic capital revenue. To close, we're encouraged by the steadiness of the quarter and the leading action taken by many of our customers who continue to build out their supply chains amid ongoing macro uncertainty.

In total, our gaap earnings, guidance calls for a range of 3 to 3 15 per share.

Tim: 4fo including net promote expense, will range between 575 and 580 per share. While core of faux excluding, net promote expense will range between 580 and 585 per share of 4 and a half cent increase from our prior Guidance. The higher midpoint is predominantly due to higher noi and strategic Capital revenues.

While headlines remain noisy, the underlying activity in our portfolio reflects a market that is active and moving forward. In that context, well-located logistics real estate has proved to be a strategic asset, especially on our platform. As broader economic uncertainty begins to clear, we remain confident in the long-term trends driving our business. Our strategy is grounded in serving customers at the center of consumption, the constant in all of this, and our team continues to execute at a very high level.

Tim: To close or encouraged by the steadiness of the quarter. And the leading action taken by many of our customers, who continue to build out their supply chains amid ongoing macro uncertainty.

Tim: While headlines, remain noisy, the underlying activity in our portfolio, reflects a market that is active and moving forward. In that context, well-located Logistics real estate has proved to be a strategic asset, especially on our platform.

With that, I will turn the call over to the operator for your questions. Thank you.

Tim: As broader economic uncertainty begins to clear. We remain confident in the long term Trends driving our business. Our strategy is grounded in serving customers at the center of consumption. The constant in all of this and our team continues to execute at a very high level.

With that, I will turn the call over to the operator for your questions.

We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing these star keys. Great.

Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.

Speaker Change: To allow everyone a chance to ask a question. We ask all participants in the queue to ask only 1 question.

Speaker Change: 1 moment, please while we pull for questions.

Our first question comes from the line of Ronald Camden with Morgan Stanley.

Speaker Change: Please proceed with your question.

Congrats on a strong quarter. I think the release noted that the pipeline, the leasing pipeline, had reached historically high levels.

So I'd just love to hear a little bit more about just what the post-liberation day impact has been, sort of any categories to call out. And then if you could tie that commentary to the decision to increase development starts and acquisitions, how you're feeling about sort of the outlook. So the pipeline is promising, even amid some of the subdued decision-making like Tim described. The pipeline is up 19% year-on-year.

Ronald Camden: Great, congrats on the strong quarter. Um, I think the release noted that the pipeline, the leasing pipeline had reached historically, high levels. Um, so I just love to hear a little bit more about, um, just what the post, Liberation day impact has been sort of any categories to call out and then if you could tie that commentary to the decision, to increase development starts and Acquisitions. Um, how you're feeling about sort of the Outlook, thanks.

One of the hallmarks here is diversity. We see good balance and good growth across different deal stages. So that's both early proposals as well as more mature negotiations. We also see a good balance and growth across different deal types. So that's both renewal and new. And we also see good diversity across different customer industries.

So where is some of the differentiation? One of the main hallmarks of this growth is concentrated growth above 100,000 square feet. So there are more larger customers in the pipeline. And then Tim also talked about 3PLs engaging in a greater way. They're working through their spare capacity and in some leading markets really beginning to need more space. And then, Ron, on the development start front, that billion-dollar increase includes the $300 million data center start that Tim mentioned in the script, and the remainder is about half build-to-suit and half spec. We've got a very strong build-to-suit pipeline right now we're working through.

Ronald Camden: Decision making like, Tim described the pipelines of 19% year on year 1 of the Hallmarks here is diversity. Uh, we see good balance and good growth across different deal stages. So that's both early proposals, as well as more mature negotiations. We also see a good balance and growth different deal types, so that's both renewal and new. And we also see good diversity across different customer Industries. So whereas where is some of the differentiation, uh, 1 of the main Hallmarks of this growth is concentrated growth above 100,000 square feet. So there are more larger customers in the pipeline. And then Tim also talked about 3pl's uh engaging in a greater way, their weight, their working through their, their spare capacity and in some leading markets, really beginning to need more space.

It's much larger than it's been over the last couple of years.

You heard we had a pretty strong signing. Actually, we had a record number and amount of signings there of $1.1 billion in the first half so far and a handful so far already before the call here in July. And then, overall, we have $41 billion of opportunities in our land bank, and most of the spec you're going to see is going to be outside of the U.S. That's Japan, India, Brazil, Latin America – or, excuse me, Mexico. And then in the U.S., you will see maybe a couple starts in the Southeast or maybe infill coastal markets.

Ronald Camden: And then uh Ron on the uh development Start Front. That billion dollar increase, includes the 300 million data centers, start that Tim mentioned in the script and the remainder is about half build the suit and half spec. Uh, we've got a very strong build to suit pipeline right. Now, we're working through its much larger than it's been over the last couple years. You heard we had a pretty strong signing actually. We had a record number and, and, and amount of of signings there of 1.1 billion in the, in the first half, so far, and a handful so far already before the call here, in in July.

Ronald Camden: Uh so uh and then overall, we have 41 billion of opportunities in our in our uh land bank and and most of the spec you're going to see is going to be outside of the US.

Ronald Camden: Uh that's Japan. India Brazil, uh, Latin America, excuse me, Mexico. And then in the US you will see maybe a couple starts in the in the Southeast or maybe infield Coastal markets.

Thank you. All right. Yeah, thanks.

Ronald Camden: Thank you.

Speaker Change: All right, next question comes from the line of Steve Saka with aqua. Isi, please proceed with your question.

Good morning. Tim or Hamid, I don't know if you could provide just maybe a little bit more color on sort of the cadence of leasing. I realize April was kind of a dark time when you guys reported Q1, but could you maybe give us a sense of just the pace of leasing kind of, just where I think kind of one Q into then kind of the April, May, June and, you know, what did that exit velocity look like in June heading into July?

Speaker Change: Uh, yeah, thanks. Good morning. Um, Tim or I mean, I don't know if you could provide just maybe a little bit more color on sort of the Cadence of leasing. I realize April was kind of a dark time when you guys reported the q1. But could you maybe give us a sense of just the pace of leasing kind of just sort of. I think kind of 1 Q into then kind of the April May June. And you know what did that exit velocity look like in June heading into July?

Yes, Steve, this is Dan. I'll start, maybe get some color from one of the other guys here. But if you take it back to 90 days ago, on the call, we actually talked about volume being 20% down from normal. This was two weeks after April 2nd and the tariff surprises. So call that maximum uncertainty time. And we actually quoted that number to highlight how much volume was actually happening despite the tariff surprises. Unfortunately, I think that did create some confusion. And that's not a stat that we're going to continue to give. Looking at too short of a duration over a quarter is not really indicative of a trend.

Speaker Change: Yes, Steve. This is uh, Dan. I I'll I'll I'll start maybe get some color from 1 of the other guys here. But if you take you back to 90 days ago, on the call, we actually talked about volume being

What we saw happen throughout the rest of the quarter was acceleration through May and June, and then the quarter ended up only down about 10% from normal. And so just in terms of what we're seeing over the last couple weeks, Tim shared the color in his remarks. And so we really try to zoom out and look at a wider range of metrics. So it is lease signings, like you asked. It's also the pipeline like we just covered. It's the build to suit dialogues. It's the customer engagement, we really take a full picture approach to be sure we're giving you a complete update.

Speaker Change: 20% down from normal, this was 2 weeks after April, 2nd and the Tariff surprises. So call that maximum uncertainty time and but we actually quoted that number uh uh to uh highlight how much volume was actually happening despite the Tariff surprises. Uh, unfortunately, I think that did create some confusion uh and that's not a stat that we're going to continue to give looking at 2 short of a duration. Over a quarter is not really indicative of a trend. What we saw happen throughout the rest of the quarter was acceleration through May and June and then the quarter ended up only down about 10% from normal.

Speaker Change: And so just in terms of what we're seeing over the last couple weeks Tim shared, the color in his remarks and so we we really try to zoom out and look at a wider range of metrics so it is Lee signings. Uh like you asked it's also the pipeline like we just called covered. It's the bill to suit dialogues. It's the customer engagement. We really take a full picture approach to be sure. We're giving you

Speaker Change: Uh, a complete update.

Speaker Change: Thank you.

All right, next question comes from the line of Caitlyn borrows with Goldman Sachs. Please proceed with your question.

Hi everyone. I was wondering if you could give us more details on the guidance. So, Tim, you mentioned that higher NOI and strategic capital drove the midpoint FFO guidance increase. But I guess with occupancy expectations unchanged despite the stronger 2Q, it also seems like pricing is kind of in line with expectations.

So, any more details on that, kind of what's better than previously? Sure. I mean, the environment, for one, has just calmed pretty significantly since April. We also have a shorter number of months left in the year, obviously. So we have improved visibility that gives us a lot of confidence in the guidance, both the increase and also reflected in the narrowing. I referred to some outperformance in the quarter. If you recall back to April, we also cited outperformance there, even though, you know, we opted to leave guidance in place at that time, given the headline. So a few of those pennies are permanent to the year, is the point there.

Hi everyone. Um I guess I was wondering if you could give uh some more details on the guidance. So Tim you mentioned that higher noi and strategic Capital drove the midpoint foe guidance increase um but I guess with occupancy expectations, uh unchanged despite the stronger 2q, um, it also seems like pricing is kind of in line with expectations. So any more details on that uh, kind of what's better than

Previously expected.

The remainder coming out of NOI is reflected in same store, despite the same midpoint, which is really, once again, narrowing of the range, expressing more confidence. And then within that 50 basis point range, our belief that we're just going to land at the stronger end of it by the end of the year.

Speaker Change: The year is the point there. The remainder coming out of noi is reflected in same store despite the same midpoint, which is really once again, narrowing of the range expressing more confidence. And then within that 50 basis, point range, uh, our belief that we're just going to land at the stronger end of it by the end of the year.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.

Good afternoon. Thanks a lot for taking my question. You know, customer dialogue and data points seem to be supportive of demand building.

But you also said that you expect conditions to remain choppy over the next few quarters. So how are you thinking about the timing of the growing pipeline translating to signed leases? And was it, you know, is there anything in particular that it would take to kind of convert this pipeline into a signed lease?

Speaker Change: Good afternoon. Thanks a lot for taking my question. You know, customer dialogue and data points. Seem to be supportive of the man building. But you also said that you expect conditions to remain choppy over the next few quarters. So how are you thinking about the timing of the uh growing pipeline translating to signed leases and was, you know, is there anything in particular that would take to kind of convert this pipeline into an assigned? Leases thank you.

Hi, it's Chris, I'll jump in and some of the other guys may as well. But decision making remains deliberate. And so we see the pipeline building, Tim described a dynamic of the deals beginning to pile up. And when we speak with customers, this is really about clarity on the macro front. And when we look at the headlines, when we look at economists forecast, there's caution in the back half of the year. And so we will see this play out over the balance of the year. And that's what that's what we're really paying attention to. Look, we've been in a condition of constant uncertainty.

Speaker Change: Hi, it's Chris. I'll jump in and some of the other guys may as well. Um, look decision making remains deliberate, and so we see the pipeline building, Tim described a, a dynamic of the deals uh beginning to pile up. And when we speak with customers, this is really about Clarity on the macro front. And when we look at the headlines, when we look uh, at economists, forecast, uh there's caution in the back half of the year. And so we will see this play out over the balance of

Of the year. And that's what, that's what we're really paying attention to.

And I know that's a favorite word in the financial industry. But having done this for a long time, you know, last year, it was all about, you know, Ukraine, and whether the Fed was going to cost, I guess, going back 18 months, that was the uncertainty. Then, when the election was settled, there was a lot of excitement about pro business policies and the like. And then basically, you had April 2, and then So, I mean, it is very, very difficult to predict anything for any length of time. But with every passing day, there's more water building up behind the dam.

And we're seeing evidence of this with the largest customers, they just can't basically go to sleep without taking more space. So that's what you're seeing is their ability to defer is getting reduced with every passing day.

Speaker Change: Look, we've been in a condition of constant uncertainty and I know that's a favorite word in the financial industry. But having done this for a long time, uh, you know, uh, last year it was all about, you know, Ukraine. And whether the Fed was going to cost, I guess, going back, 18 months, that was the uncertainty. Then, um, when the election was settled, there was a lot of excitement about, uh, Pro business policies. And the like, and then basically, you had April 2nd and Liberation day. So, I mean, it is very, very difficult to um, to predict anything for any length of time. But with every passing day, there's more water building up behind the dam. And we, we're seeing evidence of this, with the largest customers. They just can't basically go to sleep, uh, without taking more sleep, um, more space. So that's what you're seeing is their ability. To defer is getting reduced, uh, with every passing day.

Thank you. Thank you and good afternoon everybody.

Tom Cathywood: Thank you. All right next question comes from the line of Tom cathywood with btig. Please proceed with your question.

Maybe Tim or Chris, hoping you could help us square up the leading indicators. Space utilization is moving higher and proposals are up. Lease gestation is down, but the IBI activity index dropped to the lowest level since the first quarter of 23.

Tom Cathywood: Thank you. Uh, and good afternoon everybody. Um, maybe Tim or Chris is hoping you could help us square up? Uh, the leading indicators. Just space utilization is is moving higher and proposals are up.

What is driving the bifurcation between these metrics and kind of how should we think of them as an indicator going forward? Yeah, you do need to take a sort of full picture view of all these different metrics. And given the volatility Hamid just described, they're each going to depict different things. And also, please, please keep in mind, some are retrospective, and some are prospective. And so you ask after some of our customer survey data that you see in a supplemental there, I think they're doing a good job of describing the landscape. So for example, utilization, that built in the quarter 85% up 50 basis points, that's a meaningful increase and is approaching a two year trend.

Tom Cathywood: East gestation is down but the IBI activity index dropped to the lowest level. Since the first quarter of 23, what is driving the bifurcation between these metrics? And kind of, how should we think of them as an indicator going forward?

And this is reflecting both growth in the supply chain, as well as some inventory build. Now, at the same time, the IBI activity index measures that velocity, the product moving out, that has moved lower, and it's consistent with the softer economic climate, this uncertainty. Well, the third point, which we've already covered on the call is simply the pipeline building and customers measuring how they make decisions in this landscape.

Speaker Change: Yeah, you do need to take a sort of full picture of you of all these different metrics and given the volatility, I mean, just described, they're each going to depict different things and, and also please in please keep in mind, some are retrospective and some are prospective. And so you ask after some of our customer survey data that you see in the supplemental there, and I think they're doing a good job of describing the landscape. So for example, utilization that built in the quarter 85% of 50 basis points, uh, that's a meaningful increase and is approaching a 2-year Trend, and this is reflecting both growth in the supply chain, as well as some inventory build. Now, at the same time, the IBI activity index measures that velocity, the, the product moving out that has moved lower and it it's consistent with the software economic climate. This uncertainty what, the third point, which we've already covered on the call is simply the pipeline building and customers.

Measuring how they make decisions in this landscape.

Thank you. Our next Good afternoon. I just want to kind of circle back, Hamid, your comment and just some of the other comments in the call about, you know, conversations with tenants where, you know, the water is building, the dam is getting more full. And, you know, on the one hand, you have the tariff uncertainty. On the other hand, you had the OBBB bill pass, which is stimulative, you have some accelerated depreciation there, right, to use some offsetting forces, and your leasing pipelines at the highest rate it's ever been. I just how, at what point do you think a larger percentage of tenants just become comfortable being uncomfortable with the uncertainty and have to run their business?

Speaker Change: Thank you.

Our next question comes from the line of Craig mailman with City. Please proceed with your question.

Craig Mailman: Hey, good afternoon. I I just want to kind of circle back. I mean, your comment and just some of the other comments in the call about

Speaker Change: you know, conversations with tenants where

Speaker Change: How?

Speaker Change: At what point do you think?

And, you know, really that logjam starts to break. I'm just trying to get a sense as we head into the back half of this year and into next year, right, how this could trend, particularly from a net absorption perspective, where even with things kind of being uncertain and choppy. You guys, you know, you held average occupancy steady. You're through, you know, part of your expiration schedule. And it sounds like on the built to suit side, the new leasing side, you're starting to get some momentum. So, you know, I don't want it sounds like you guys are trying to maintain some discipline around setting expectations.

Speaker Change: A larger percentage of tenants just become comfortable, being uncomfortable with the uncertainty and have to run their business. And, you know, really that Log Jam starts to Break. Um, I'm just trying to to get a sense as we head into the back half of this year and into next year.

Speaker Change: Right. Um,

Speaker Change: how how this could Trend particularly from a net absorption perspective where, um, even with things kind of

Being uncertain and choppy. You guys, you know, you held average occupancy steady. Um, you're through, you know, part of your expiration schedule, and it sounds like on the built the suit side, the new leasing side, you're starting to get some momentum, so, you know, I don't want. It sounds like you guys are trying to

But if you had a kind of couch it on the high and the low end of your probabilities of things really accelerating here, in second half into, you know, first half of next year, kind of where do you peg that giving all the conversations that you're having? Um, I think I understand the question. Basically, I'll speak for myself.

Speaker Change: maintain some discipline around setting expectations. Um, but if you had a kind of couch that on the high and the low end of your probabilities of of things really accelerating here in second half into, you know, first half of next year, kind of where do you Peg? That giving all the conversations that you're having with tenants?

I don't really care about the next quarter, the following quarter, because it's so dependent on what comes out of Washington. And people make these decisions in the short term based on emotion. What I do know is that we have a very significant mark to market. I know that there is shortage of labor coming up in the a lot of money on chip plants, putting extra pressure on demand for construction, all this data center stuff, and all this stimulus that's going to come in from ITCs. So to make a long story short, I'm very comfortable when we take two, three, four years out, given the escalation in replacement costs.

And, you know, rates are not going to go through the floor. So the rates times replacement costs gives you the rents that you expect in the long term. But I don't know what the path to that will be over the next quarter or two. It's just not the way we run our business. And maybe you guys are giving us more credit about having that clarity than we deserve. So I feel great about the business. I think every bit of business that's delayed is going to translate to more business in the future. And one other concept I'll throw out at you, and those of you who've been listening to us for probably too long have heard this.

Speaker Change: Um, I think I understand the question. Um, basically, um, I'll speak for myself. I don't really care about the next quarter of falling quarter because it's so dependent on what comes out of Washington. Um, and people make these decisions in the short term based on emotion. But I do know is that we have a very significant Mark to Market. I, I know that there is shortage of Labor coming up in the construction industry because of the immigration policies. I I know the government is spending a lot of money on chip plants putting extra pressure on demand for construction. All this data center stuff and all this stimuli stimulus that's going to come in from itc's. So to make a long story short, I'm very comfortable when we take 2 3, 4 years out. Um given the escalation in replacement cost and you know rates are not going to go through the floor. So the rates time

Speaker Change: is replacement cost, gives you the

Speaker Change: the rents that you expect in the long term but I don't know what the path to that will be over the next uh quarter or 2. It's just not the way we run our business and maybe you guys are giving us more credit about having that Clarity than than we deserve. So uh, feel great about the business. I think every bit of business that's delayed is going to translate to more business in the future and 1 other concept. I'll throw out at you and

In good markets, people are 10 to 15% more optimistic. In markets that are choppy or risky, they're 10 to 15% more pessimistic. That's a 30% swing. That immediately goes the other direction when two tenants compete for the same space, and one of them loses out and then loses out again. So FOMO is a big factor about people's confidence to move on. And generally, I've found that people take more comfort in being, among other people, making the same sort of decision than being somewhat contrary. So equally long answer to your question, but there you have it.

Speaker Change: You've been listening to us for probably too long. I've heard this in good markets, people are tend to 15% more optimistic in markets that are choppy or risky. There are 10 to 15% more pessimistic. That's a 30% swing

Speaker Change: That immediately goes the other direction when 2, tenants compete for the same space, and 1 of them loses out, and then loses out again. So fomo is a, is a big factor about people's confidence to move on. And generally have found that people take more comfort in being, uh, among other people making the same sort of decision than being somewhat contrarian. So equally long answer to your question, but there you have it.

Speaker Change: Thank you.

Good morning. In regards to the 136 million square feet of leasing proposals, I was wondering if you could provide some more color around it. For example, like how much of that is renewal versus net incremental demand? And historically, what has your conversion rate been in this kind of proposal basket? And ultimately, I'm just trying to gauge, going back to the, you know, building level of water behind the dam, how much that could actually net impact Prologis going forward.

Our next question comes from the line of key. Ben Kim with true Securities. Please proceed with your question.

Speaker Change: Thank you. Good morning. Uh, in regards to the 136 million square feet of leasing proposals, I was wondering if you can provide some more color around it. Um for example like how much of that is renewal versus Net incremental demand? Um and historically what has your conversion rate been and that's kind of proposal basket and ultimately I'm just trying to engage uh going back to the you know building.

Speaker Change: I love a walk and a water, you know, behind the dam. You know how much how much that could actually net impact prologue that's going forward?

So let me give you a perspective, and then the other guys can throw in the more specifics around it. I think of leasing as having three components. One is renewal leasing. And that tends to be very, very strong in times of higher uncertainty, because the best, easiest decision to do is to make do with what you have and just kick the can down the road until you really have to make the decision. So that part of our business is much stronger than normal. Then there is new leasing, which is somebody all of a sudden deciding that they need more space because they didn't think about it two years later to go after a built-to-suit, two years earlier to go after a built-to-suit.

So uh, let me let me give you a perspective and then the other guys can throw in the more specifics around it. I think of leasing as having 3 components, 1 is renewal Leasing and that tends to be very very strong in times of higher uncertainty because uh the best easiest decision to do is to make do with what you have and just kick to the can down the road until you really have to make the decision.

Speaker Change: So that part of our business is much stronger than normal.

And that business is slower than normal, for sure. Because if every time you move, you got to buy new equipment, new racking, you know, refitting your space, probably hiring some new employees, it's a very expensive proposition. And in a kicking the can down the road.

And then there's finally built-to-suit activity, which I'm going to go on a limb and say this is the strongest it's been in my career. So, you know, people who can plan in the long term are also, I think, thinking the way I'm thinking about it, which is they're looking at the couple of years by the time these projects are fully operational. And they look at the factors driving the long-term health of their business, like e-commerce and things like that, and they're feeling good about it. So the only part of our business that's slow is leasing of spec space.

If every time you move, you got to buy a new equipment, new racking, you know, refitting your space, uh, probably hiring some new employees. It's a very expensive proposition and in the choppy environment you're going to do less of that than just kicking the can down the road. And then there's finally built to suit, uh, activity. Which I'm going to go on a limb and say, this is the strongest. It's been in my career. Uh, so, you know, um people who can plan in the long term are also. I think thinking the way I'm thinking about it which is they're looking at a couple of years, by the time, these projects are fully operational and and they look at the factors driving, the long term, health of their business, like, e-commerce and things like that, and they're feeling good about it. So, um, the only part of our business that's, uh, that's slow is leasing of spec space.

Hey, it's Chris. I'll just jump in on some of the details. And I'd also point you to my earlier remarks on the pipeline, talking about it's up 19% and there's really good balance. And so the growth rates are sort of similar across multiple of these metrics, whether it's new versus renew, whether it's early proposals versus mature negotiations. I talked about size being a difference. That's one area where larger deals just take longer to come together. And so you're going to see that represent an outsized share. That doesn't take anything away from the fact that the larger scale requirements are the things that are really lifting the market today.

Speaker Change: Hey, it's Chris. I'll just jump in on some of the details, and I'd also point you to my earlier remarks on the pipeline talking about, it's up 19%, and there's really good balance. And so, the growth rates are sort of similar across multiple of these metrics, whether it's new versus renew, uh, whether it's early proposals versus mature, negotiations,

Speaker Change: Uh, I talked about size being a difference, that's 1 area where larger deals just take longer to come together. And so you're going to see that represent an outside share, but that doesn't take anything away from the fact that the larger scale requirements are the things that are really lifting uh, the market today

Well, the bill to sue the market. Yes.

Speaker Change: Well, the bill to sue the market.

Speaker Change: Yes.

Thank you. Our next.

Speaker Change: Thank you.

Thanks for taking the question, good afternoon. Maybe just, Hamid, of course, just stepping back, I understand sort of quarter to quarter stuff, but just looking out sort of two, three years with, you know, call it seven and a half percent vacancy, the Japanese you've referenced. In this environment, what scenario do you see sort of rents inflecting or real rent growth? And what do you think sort of a normalized, you know, net absorption is for the industry? I'm just wondering, given we've seen a massive increase or I should say, a decent pick up in vacancy, and I'm just trying to, whether the inflection is this month or next year, I'm just trying to figure out how you think about the next two, three years, given where vacancy is, and do we actually see, you know, pricing power?

Speaker Change: Our next question comes from the line of Vikram mehrotra with mizuho. Please proceed with your question.

Thank you the question, good afternoon um maybe just um give me the price just stepping back. Uh I understand sort of quarter to quarter stuff but just looking out, sort of 2, 3 years with, you know, call it 7 and a half percent vacancy, the choppiness you've referenced, um, in in this environment, What scenario do you see sort of rents inflecting or real rent growth? And what do you think, sort of a normalized? Uh, you know, net absorption is for the industry. I'm just sort of wondering given we've seen a massive increase or I should say, a decent pick up in vacancy and I'm just trying to weather in the inflection is this month, or next year? I'm just trying to figure out how you think about the next 2, 3 years given where vacancy is and do we actually see, you know, pricing power,

Yeah, I think vacancy rate of 7.4 is pretty close to where you're going to see the peak in this cycle, absent some calamity. We may have another two or three quarters of bouncing around 10 basis points here or there, but I think you're essentially most of the way to where you're going to end up between the high threes, where the drop was, and the mid-sevens, let's call it, where I think this is going to end up. As to when you really get pricing power is where that number comes down to around 5%. That's historically been the magic number.

Speaker Change: Yeah, I think vacancy rate of uh 74.4 is pretty close to where you're going to see the peak in this cycle.

Speaker Change: Uh absence on Calamity, we may have another 2 or 3 quarters of bouncing around 10 basis points here or there, but I think you're essentially most of the way to where you're going to end up uh between the i3s, where the trough was and and the mid 7s, let's call it. Where I think this is going to end up

By the way, 7.4% is almost the median vacancy rate since 2000. think about this, putting aside COVID years with supercharged, which we call it e-commerce absorption, it is 7.4 is a norm in this business pretty much. In fact, to be precise, 44% of the time, the vacancy rate in the last 25 years has exceeded 7.4%. We are just spoiled by having come out of an environment where we've seen high 3% vacancy rates, and by the way, high 3% unemployment rates. And now we're kind of really getting wigged out because unemployment is in the low fours and vacancy rates are in the seventh.

Speaker Change: As to, when you really get pricing power is where that number comes down to around 5%. That's historically, been the magic number. By the way, 7.4% is almost the median. Vacancy rate.

Speaker Change: Since 2000.

Speaker Change: Just think about this putting aside Co years with supercharged. Um, uh, what you call it the e-commerce absorption. It is 74, is a new, is a norm in this business, pretty much for, in fact, to be precise. 44% of the time the vacancy rate in the last 25 years, has exceeded 7.4%.

Speaker Change: so,

This is pretty normal. I think when we come down to 5%, we're going to get really good pricing power above inflationary pricing power. And just figure that the market, I mean, Chris will walk you through our best guess, but I kind of think of it as a business that grows at 1.5% to 2%. So in a normal economy, when you don't have all kinds of noise coming out of different places, it should take a year or two for it to normalize to 5%, which is the equilibrium vacancy rate, because we can predict deliveries pretty closely.

Speaker Change: We are, we are just spoiled by having come out of an environment where we've seen High 3%, vacancy rates. And by the way, high 3%, unemployment rates and now, we're kind of really getting wigged out because unemployment is in the low fours and vacancy rates are in the in the 7th, this is pretty normal. I think when we come down to 5%, um,

So really, the only variable is demand. And I don't know exactly what the demand numbers are going to be, but at some point, they're going to center around the norm, which is about 250 million feet. They're not going to go to 375, where it was during COVID, because that was driven by a one-time really big shift. I think you heard me talk about it at that time. We got six years of growth in six months. We're still growing off of those higher numbers, but I can't think of another situation where we're going to get six years of growth in six months.

Speaker Change: It's um we're going to get a really good pricing power above inflationary pricing power and just figure that the market. I mean, uh, Chris will walk you through our best guess but I kind of think of it as a, as a business that grows as 1 and a half to 2%. So, in a normal economy, when you don't have, you know, all kinds of noise coming out of different places. It should take a year or 2 for it to normalize to 5%, which is the Glo, um, the uh, equilibrium vacancy rate, because we can predict, um, deliveries pretty pretty closely. So really, the only variable is demand, and I don't know exactly what the demand numbers are going to be.

Speaker Change: But at some point, they're going to send center around the norm which is about 250 million feet. They're not going to go through 375 where it was during Co because that was driven by a 1-time.

So mid-200s, a year or two, you're going to get pricing power. And when you do, It's going to be really above inflation in the short term, because the pipeline hasn't started, construction costs have been going nuts. And I think they're going to continue to go up.

Decided at that time, we got 6 years of growth in 6 months. Um, we're still growing off of those those higher numbers but I, I can't think of another situation where we're going to get 6 years of growth in 6 months, so, um, Mid to hundreds, um, a year or 2, uh, you're going to get a pricing power.

Speaker Change: And you do.

It's going to be really above those inflation in the short term because the pipeline hasn't started. Construction costs have been going nuts.

So there you have it.

Speaker Change: And I think they're going to continue to go up.

Speaker Change: So there you have it.

Thank you.

Speaker Change: Our next question comes from the line of Nick filmon with beard, please proceed with your question.

Hey, good morning out there. Maybe just, Tim, question on bad debt. I think in June, you referenced that that was trending better than expectations on that end. But maybe just an update here through 2Q, just kind of with the macro uncertainty and then anything you're seeing, whether it be in the space size or the type of business where tenants are having a little bit of credit issues. Thanks. Yeah, that was relatively in line with the first quarter. It is elevated. We're probably bouncing between 35, 40 basis points where I think, you know, our history is closer to 20 or even a little below.

Hey, good morning out there, maybe just uh Tim question on bad debt. I think in June you referenced that that was trending better than expectations on that end. But uh maybe just an update here through 2q just kind of with the macro uncertainty and then anything you're seeing with whether it be in the space size or the type of business, where tenants are having a little bit of credit issues. Thanks

The other reference point on all that is the height that we've seen during the GFC, which was up into the 50s. I'll expect something on the order of 40 over the balance of the years. We are keeping a very close eye on. With regard to particular industries, I mean, nothing that I would really build a thesis around. It's some larger customers at times. I feel like there's a little bit of a balance to Southern California, a little bit of a balance to larger users, home-oriented, but not enough to really break out into its own category.

Speaker Change: Yeah, that that was relatively in line with, with the first quarter is elevated. We're probably bouncing between 35.40 basis points. Where I think, you know our history is is closer to 20 or even a little below. Uh, the other, uh, reference point on all that is, is the height that we've seen during the GFC, which, which was up into the 50s? Uh, I'll expect something.

I think the strong retailers are on the offensive. And I think probably in the retail sector, you've got the biggest difference between winners and losers. And winners are just taking share.

One other thing about credit losses that's important to keep in mind, this is the first cycle I've seen where this is happening, in that the mark-to-markets have been so large that the defaults that we've had, every single one, actually, I shouldn't say every single one, but in aggregate, have been NPV positive, not negative, because our opportunity to capture the higher market rent earlier than we thought makes up for more than the downtime that we experienced. So yeah, it may be a short-term earnings impact, but it's not a value impact or even a long-term earnings impact.

Speaker Change: On the order of 40 over over the balance of the year, as we still watch, uh, tenant Health which we are keeping a very close eye on, uh, with regard to particular Industries. I mean, nothing that I would really build a thesis around, um, it's some larger customers at times. I feel like there's a little bit of a balance to Southern California. A little bit of a bounce to larger users, uh, home oriented but not enough to really break out, um, into its own category. I think the strong retailers are on the offensive and the I think probably in the lead uh retail sector. You got the biggest difference between winners and losers and and when I was just taking share 1 other thing about credit losses, that's important to keep in mind. This is the first cycle, I've seen where this is happening in that the market to markets have been so large that the defaults that we've had every single 1 actually. I shouldn't say every single 1, but in aggregate have been npb npv positive.

Not negative because our opportunity to capture the higher Market rent earlier than we thought. Um, May makes makes makes up for more than the downtime that we experience. So yeah, it may be a short-term earnings impact, but it's not a value impact or even a long-term earnings impact,

Great, thanks. Hamid, I thought your answer to Craig's question earlier was helpful. Hopefully, I got this right, that you talked about the differential between those markets where tenants are comfortable and those that are choppy and how FOMO can change that very quickly.

Speaker Change: Thank you. Our next question comes from the line of Blaine heck with Wells, Fargo. Please proceed with your question.

I guess, are there any specific geographical markets that you think could flip most significantly from being choppy to getting more competitive and maybe how quickly that could happen? I think by Chris is going to give you the names, but by definition, it's the markets that have strong long term fundamentals and have taken the biggest hit in the short term, i.e. Southern California, because a lot of people kind of like two quarters ago thought Southern California was going to fall into the ocean and everybody was going to go out of business. So there was very little FOMO, whatever the opposite of FOMO was, there was a lot of that, and I think once a couple people start losing deals in Southern California, and they see the stuff coming through the ports, it ain't going to come from Kansas, I can tell you that.

Blaine Heck: Great. Thanks me. I thought your answer to Craig's question earlier was helpful. Hopefully I got this right that you talked about the differential between those markets where tenants are comfortable and and those that are choppy and how fomo can change that very quickly. I guess are there any specific geographical markets that you think could flip most significantly from being choppy to getting more competitive and maybe how quickly that could happen?

Speaker Change: I think by Chris is going to give you the names, but by definition, its the markets that have strong long-term fundamentals.

It may not come from China, but it's going to come from somewhere else.

I don't mean to pick on Kansas. But I think as soon as they see that and lose a couple of deals, I think you'll see that market bounce, because it's bouncing off of an exaggerated bottom. So by definition, that would be a big deal.

And that's taken the biggest hit in the short term. I eat Southern California because, um, a lot of people kind of like to quarters ago, thought Southern California was going to fall into the ocean, and everybody was going to go out of business. So, there was very little fomo whatever the opposite of fomo was, there was a lot of that. And I think, once a couple people start losing deals in Southern California and they see the stuff coming through the ports, ain't going to come from Kansas. I can tell you that know, it may not come from China, but it's going to come from somewhere else. I don't want mean to the Kansas but um, but uh, I think as soon as they see that then lose a couple of um deals. Uh, I think you'll see that market bounce because it's bouncing off.

Chris, do you want to add? I think maybe another part of this question is, what are the really good markets today? So... Yeah. No, I'd underline the point that we see secular outperformance in these high-barrier geographies and they can really move quickly.

Speaker Change: Of an exaggerated bottom. So by definition that would be a big mouth.

What are the outperforming, what are the underperforming geographies? Well, for sure, international is a theme, whether it's Europe, whether it's Latin America, in particular, the consumption centers there, like a Mexico City and a Sao Paulo. And then turning to the United States, we've had this... Those being good.

Thank you. Yes. And we'll, in some cases, already are doing this hockey sticks, for example, in Brazil, favorable hockey stick. In the United States, we still are going through this transition period, this sort of post-pandemic normalization where the interior markets outperformed. Last year, it remains a trend this year. But what's changing are a couple of things. Number one, not all coastal markets are created equal. So, SoCal is weak, but Southern Florida, Washington, D.C. are examples of greater resilience. And then across some of the United States, we've seen better stability in the Midwest, though geography like Indianapolis had to contend with excess supply and it's working through it.

And then across the Sunbelt, there's been some excess supply, but we're seeing those markets work through it as well. Dallas comes first. The leading sub markets there are really firming. So you're starting to see a transition across a range of markets. I think Houston and Nashville are pretty strong. Absolutely. I left those out. Houston, Nashville, Atlanta.

Speaker Change: Thank you. Yes. And we'll in some cases. Already are doing this hockey sticks. For example, in Brazil uh favorable hockey stick the United States. We still are going through this transition period, this sort of post-pandemic normalization, uh, where the interior markets, outperformed last year, remains a trend this year, but, but what's changing are a couple of things. Number 1, not all Coastal markets are created equal. Uh, so SoCal is, is weak but Southern Florida. Uh, Washington. DC are examples of Greater resilience and then across some of the United States. We've seen better stability in the midwest. So geography, like Indianapolis had to contend with excess Supply and it's working through it and then across the Sun Belt. There's been some excess Supply, but we're seeing those markets work through it as well. Dallas comes to mind. Uh, the leading submarkets, there are really firming, so you're starting to see, uh, transition across a range of markets.

Speaker Change: I think, Houston and Nashville are pretty strong. Absolutely, I left those out Tuesday in Nashville, Atlanta.

Speaker Change: Our next question comes from the line of Mike Mueller with JP Morgan. Please proceed with your question.

Yeah, hi, I guess sticking with markets, do you think any tariff dynamics will cause you to pivot back to some of the regional markets that you sold out of, you know, following the A&B merger? Ever? Probably. But the one that we did come back to, I'm not sure was a great idea, to be perfectly frank with you, which was Savannah. And we kind of got ended up back in there with with the merger. It wasn't a conscious decision. But we thought about it. hard about whether we should stay in or not stay in. And we decided to stay in.

Mike Mueller: Yeah, hi, I guess sticking with markets. Do you think any tariff Dynamics will cause you to Pivot back?

Mike Mueller: To some of the regional markets that you sold out of you know, following the A&B merger.

And I think our earlier decision was actually the right one. I think it's not fundamentally a long term, strong market, notwithstanding it's, it's a very strong and well run port. But you know, that's nothing. I mean, that's less than 1% of our business that I can think of that way. So I don't think so. We've been in and out of Tampa a couple of times. I think we're feeling better about Tampa these days than we did before. We've been in and out of Minneapolis a couple of times. We're not going back in.

Mike Mueller: Ever probably. Um, but uh, the 1 that we did come back to, I'm not sure it was a great idea to be perfectly Frank with you, which was Savannah. And we kind of got ended up back in there with uh, with the merger. It wasn't a conscious decision, but we thought about it, um, hard about whether we should stay in or not saying that we decided to stay in. And I think our earlier decision was actually the right 1. I think it's not fundamentally a long term, strong markets, notwithstanding its um, its uh, very strong and well-run Port, um, but, you know, that's nothing. I mean, that's less than 1 tenth of a percent of our business that I can think of that way. So,

Dan, what do you think? No, I think we're in 31 markets in the United States. We're in about 75 consumption centers globally. I think that accounts for about 78% of the world's GDP in those markets. I think we're in the right markets, and we're going to stay focused there. Thank you.

Mike Mueller: I don't think so. We've been in and out of Atlanta, uh, of Tampa. A couple of times, I think we're feeling better about Tampa. These days than we did before, we've been in and out of Minneapolis a couple of times. Uh, we're not going back in.

Uh Dan, what do you think? No, I think we're in 31 markets in the United States. We're in about 75. Uh consumption centers globally. I think that accounts for about 78% of the world's GDP in those markets. I think we're in the right markets and we're going to stay focused there.

Speaker Change: Thank you. Our next question comes from the line of Samir um, canal with Bank of America. Please, proceed with your question.

Good afternoon, everyone. I guess along the same lines of the last question, Dan, you took up your acquisition guidance. Maybe talk about broadly the opportunities you are seeing on the transaction side, anything you can provide on pricing and even from an underwriting standpoint, like what are you underwriting for occupancy and rent growth over the next few years given the tariff uncertainty, etc.

Thank you. You know, what's been interesting is just how resilient the overall transaction market has been, you know, especially since April 2nd. There's a lot of capital that was sitting on the sidelines. It's out there, very active right now, chasing right down the fairway, high quality, well-located assets with a higher wall than people were looking for over the last couple of years. So, what we've been focusing on really is more value-add acquisitions. We're not interested in chasing those core returns down into the low sevens, which is where we're seeing them today. Our teams are turning over opportunities 150, 200 basis points better than that, whether it be a broken development or just some vacancy, but certainly not as many opportunities as I would hope for.

Thank you. Good afternoon everyone. Um, I guess along the same lines of the last question. Dan, you took up your acquisition, guidance, maybe talk about broadly, the opportunities you are seeing on the transaction side, anything you can provide on on pricing and and even from an underwriting standpoint like you know, what do you earn writing for occupancy and rent growth over the next few years given given the the, the Tariff Insurance Etc. Thanks

Our focus on the deployment front is really, like I said earlier, it's data centers, it's build the suits, and then some spec where the market fundamentals make sense. Yeah, the only other thing I would add to what Dan said is that in Europe, returns are in the low sixes, actually.

Speaker Change: Yeah, you know, what's been interesting is just how resilient the overall Trends Market. Transaction Market has been, uh, you know, especially since April 2nd, uh there's a lot of capital that was sitting on the sidelines. It's out there very active, right now, chasing right down the Fairway, high quality well-located assets with a higher Walt than than, than people were looking for over the last couple years. Uh, so what we've been focusing on really is more value, add Acquisitions, we're not interested in chasing those core returns down into the low 7s, which is where we're seeing them today. Uh, what we're, our teams are turning over opportunities, 150 200 basis points, better than that, whether it be a broken development or uh, just some vacancy. And and and uh, but certainly not as many opportunities as I was, as I would hope for our focus on the deployment. Front is really like I said earlier, it's data centers.

It's spelled as suits and then some spec where the market fundamentals make sense.

So that market is even more expensive than the US market.

Speaker Change: Yeah. The only other thing I would add to what Dan said is that in Europe. Um, the um returns are in the low 6 is actually, so that market is even more expensive than the US market IRS.

Our next question...

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of uh, Vince tabone with Green Street. Please proceed with your question.

Hi, good morning. Cash same store guidance implies growth will decelerate to about three and a half percent in the back half versus, you know, mid five percent growth in the first half. Can you just discuss what's driving that deceleration just given, you know, spread and occupancy trends are pretty solid, and it would seem to, you know, the building blocks and seem to imply growth would be stronger than three and a half percent in the back half. Like, I guess, what's the kind of what's the headwind in the back half? You can just kind of write any color there would be helpful.

You know the building blocks and seemed to imply growth would be stronger than 3 and a half percent in the back half like I guess, what's the kind of what's the headwind in the back half so you can just kind of provide any color. There would be helpful

Yeah, hey, Vince, it's really about comps in the end. One note before getting into that detail is, while rent change remains very strong, if you look back at the levels of rent change that we've had the last two or three years, is coming in at lower amounts. So those contributions to same store growth will normalize, let's call it. But more specifically, the back half of this year will have more of an occupancy drag compared to 24 than the first half did. We also have some one-time items scattered around the back half, which deal with unfavorable comps, where we had some strong one-time income in 24 that won't be repeating this year.

There's recovery noise in there.

So it's actually a reason I would encourage you, I understand the analysis you performed, but you do need to widen out to a full year, most times, to get a full picture, and I would point you to our guidance there. Yeah, the other thing, Vince, that's going on is that we've put away a lot of the uncertainty in the second half. So we already know the answer to those questions for second-half deals. And obviously, there's a lot of mark-to-market to a lot of these deals that drives same-store NOI, but most of those have been captured or locked in for this year, bigger portion of the second half than obviously at the beginning of the year for the first half.

Speaker Change: Yeah, hey Vince. It's, it's really about comps in the end. Um, 1 know before getting into that detail, is while rent, change remains very strong. If you look back at the levels of rent, change that we've had the last 2 or 3 years is coming in at lower amounts. So, those contributions to same store growth will, uh, will normalize. Let's call it. But more specifically, the back half of this year will have more of an occupancy, drag compared to 24, then the first half did. Uh, we also have some 1 time items scattered around the back half, which deal with, uh, unfavorable comps where we had some strong 1-time income in 24 years.

So... That's another dynamic.

Wait, a lot of the uncertainty in the second half so we already know the answer to those questions for a second half deals. Um, and obviously there's a lot of Mark to Market to a lot of these deals that drives the same story in Ohio, but most of those have been captured or locked in, um, for for this year. Um, bigger portion of the second half than obviously at the beginning of the year for the first half. So,

That's another dynamic.

Speaker Change: Thank you.

Speaker Change: All right, next question comes from the line of Brendan Lynch with Barclays. Please proceed with your question.

Great, thanks for taking my question. Hamid, your commentary on market vacancy was helpful. In terms of your portfolio, Asia occupancy was up quarter to quarter, but the other regions were down.

Can you update us on your expectations for a second half inflection in occupancy and any considerations for this specific region? Well, China's definitely, I think, past bottom, and it's getting better. And yeah, the numbers there can move around a lot, because occupancy, I don't actually know exactly what it is, but probably has a high eight, low nine, depending on the market you look at. So there's the biggest opportunity for pickup there. And it's been in the dumps for the last three years. And Japan is much more stable and predictable. But China's been, has moved down quite a bit.

Brendan Lynch: Great. Thanks for taking my question. Amid, your commentary on Market vacancy was helpful in terms of your portfolio. Asia occupancy was up quarter to quarter, but the other regions were down. Can you update us on your expectations for a second half in flection in occupancy? In any considerations for this specific region?

The point is, the China numbers don't actually move our numbers because, because of our share. So, but that market, I'm feeling better about. Yeah, Hamid's point I'll just pile on is also the same point that it's small is also a reason that its occupancy can appear a bit more volatile. And we've had some good success this last quarter getting chunks of the portfolio leased up and that describes its increase.

Well China's definitely, I think pass bottom and it's getting better. Um and yeah, the numbers there can move around a lot because occupancy, I don't actually know exactly what it is. But probably has a high 8 low 9 in, depending, on the market. You look at. So there's the biggest opportunity for pickup there and it's been, uh, in in the dumps for the last 3 years. Um, and, um, Japan is much more stable and and predictable, but China's been had moved down quite a bit. The point is the China numbers don't actually move our numbers because, uh, because

Brendan Lynch: Of our share. So, uh, but that market, I'm feeling better about

Speaker Change: Yeah, I mean it's point I'll just pile on is also the same point that it's small. It's also a reason that it's occupancy can appear a bit more volatile and we've had some good success. This last quarter getting uh chunks of the portfolio least up and that describes its uh increase.

Brendan Lynch: Thank you.

Speaker Change: Our next question comes from the line of John Peterson with Jeffrey's please proceed with your question.

Oh, great. Thank you.

Maybe a slightly different topic here. But as we see more automation in warehouses, I understand that this requires more power than legacy warehouse use cases. So can you talk about how prevalent those higher power demands are in just space demands today and how you guys are managing it in this power-constrained environment, as you guys know from your data sets? Well, you know, the number that I carry around in my head, that's approximately correct, is that it's the power demands of a regular warehouse, not a temperature controlled warehouse, or about five kilowatt hours per square foot.

Speaker Change: Okay, great, thank you. Um,

Speaker Change: Maybe slightly different topic here, but as we see more Automation and warehouses, um, I understand that this requires more power than Legacy Warehouse use cases. So, can you talk about how prevalent, those higher power demands, um, are in just space demands today and how you guys are managing it? Um, and this power constraint environment as you guys know, from your, uh, from your data center business.

And we think with full automation, and EV charging of forklifts, and maybe some light trucks, over time, that can get to 25. So that's a pretty significant 5x type of increase.

Everybody talks about data centers being an issue and demand on the load of the system. But automation, as you point out, is going to be also a very big driver. And yeah, I know the EV business is kind of slow these days, and policy has changed quite a bit. But look at the rest of the world, that business is growing very rapidly everywhere else, just not here because of policy. So that's a third leg of that demand driver, if you will. So I think everything points to the price of electricity going up, and the utilization of electricity increasing in pretty much everything.

Speaker Change: Well, uh, you know, the number that I carry around in my head is approximately correct. Is that, uh, it's the power demands of a regular Warehouse, not a temperature controlled Warehouse, or about 5, kilowatt hours per square foot. Um, and uh, we think with full Automation and EV, charging of, um, Oracle lists and maybe some like drugs, um, over time that can get to 25. So, that's a pretty significant 5x. Type of, um, increase everybody talks about data centers, being, uh, being an issue as a demand on

Both logistics and data centers.

Speaker Change: Solution. This is actually stemming from the expertise that we've gained through this Mobility business with micro grids actually. So, this is not a revenue, generating business. Yet we've got a big Pipeline and it's a very strategic growth area for us. It's, it's really Bridging, the Gap as the utility continues to struggle through. Exactly. What? What Hami just described here, which is keeping up with the demand for both Logistics and data centers.

Thank you. Our next question comes from the line of Nicholas Julico with Scotiabank. Please proceed with your question.

Thank you. All right. Next question comes from the line of Nicholas ulo with gochi bank. Please proceed with your question.

Hi, this is Greg. So I'm just hoping to dig a bit more into the source of demand that you're seeing. You know, who are the end users right now? How's that compared to the last few years of demand? for the similar makeup. Tenant Demand, and why.

Speaker Change: Hi. This is uh, Greg mcginness on with Nick. We're just hoping to dig a bit more, um, more into the source of demand that you're seeing, you know, who are the end users right now. How's that compared to the last few years of demand? And on the build the suit side, that a similar makeup uh of tenant demand? And why do you think they're choosing build to suit over currently vacant space?

Hi, it's Chris. I'll jump in. I think Dan will have some remarks as well. As I look across customers that are active, you know, the hallmark here is diversity. There are a couple of categories we've been talking about that though are part of this demand growth, this demand acceleration. Things we've been talking about like basic daily needs, so think food and beverage. We've also been talking about the importance of e-commerce and the retailers taking share. And then we are seeing increased incidence of sort of light manufacturing, light assembly. Requirements, those are the sort of obvious drivers we've been talking about in the past.

Speaker Change: Hi, it's Chris, I'll jump in. I think Dan will have some remarks as well as I look across customers that are active. You know, the Hallmark here is diversity, there are a couple of categories of them in talking about, uh, that though are part of this, uh, demand growth. This demand acceleration things have been talking about like, basic daily needs. So think food and beverage. Uh, We've also been talking about the importance of e-commerce and the retailers taking share, uh, and then we are seeing increased incidents of sort of light, manufacturing, light assembly, uh requirements, those are those are

Less obvious, we've had very active dialogue in leasing with auto customers, which might surprise you. It's more on the spare parts or the replacement parts and tire side of the business as consumers maintain aging vehicle fleet. And then I already discussed looking at different companies, the 3PL component is beginning to work or has begun to work through that spare capacity and is beginning to need more space. And as to the makeup of the build-to-suit pipeline and what we've signed this year, these are large customers. These are Fortune 500 customers that can see through the short-term noise and they're making long-term decisions.

The buildings themselves are actually all pretty big. We're seeing them really focus on large buildings, even, you know, million, million five plus. And there's not a lot of spec sitting out on the market for buildings that size. And then, of course, it becomes locational. There may be vacancy in one side of the country and they need to be in other locations. So we're finding our 14,000 acres of land that we own or control is a differentiator for us there. And we're capitalizing and taking more than our fair share.

Speaker Change: Are the sort of obvious drivers, we've been talking about in the past, you know, less obvious, we've had very active uh, dialogue and leasing with auto customers which might surprise you. It's more on the the spare parts, or the replacement parts and tire side of the business. As, as consumers, maintain aging vehicle Fleet and then I already discussed the looking at different companies. The 3pl component is beginning to work or has begun to work through that spare capacity and is beginning to need more space. Yeah. And as the makeup to the makeup of the build, the suit of pipeline uh and what we've signed this year, these are really these are large customers. These are Fortune, 500 customers that can see through the short-term noise, and they're making long-term decisions. The buildings themselves are actually all pretty big. We're seeing them really focus on large buildings, even you know, million million 5. Plus and there's not a lot of spec, sitting out on the market for billions of that size. And then, of course, it becomes locational. There may be vacancy in 1 side of the

Country and then they need to be in in other locations. So we're finding, um, our 14,000 acres of land that we own or control is a differentiator for us there. And, uh, we're we're capitalizing and taking our more than our fair share.

Speaker Change: Thank you. Our next question comes from the line of AJ Peak with keybanc, capital markets Inc. Please proceed with your question.

Hi, it's Todd with AJ. Question for you, Tim. You mentioned net absorption was 28 million square feet in the quarter. I think that compared to 20. So far in the first half, do you have an update?

for the full year, and then Dan on the 3PLs. provide a little bit more detail about 3PL. Reporter, and comment how you see leasing demand trend. You've got your numbers right. So year to date net absorption is 49 million square feet. Let's pause and reflect. That's a really good result, given the uncertainty that's played through the marketplace over the last six months. Now, as we talked about in the back half of the year, it's prudent to monitor that uncertainty, that macro caution. And so I think full year numbers should land in the 75 to 100 million square feet.

Speaker Change: Hi. It's uh, Todd with AJ. Um, a question for you, Tim, you mentioned net absorption was 28 million, square feet in the quarter. I think that compared to 21 million square feet in the first quarter. So 49 million, uh, so far in the first half, do you have an updated view, uh, for the full year and and then Dan on the 3pls, um, can you provide a little bit more detail about, uh, 3pl leasing activity in the quarter and comment, how you see leasing demand, uh, trending for, for 3, going forward in the near term.

You've got your numbers, right? So year to date and absorption is 49 million square feet. Let's pause and reflect. That's a really good result given the uncertainty that's played through the marketplace over the last 6 months.

Yeah, then on the 3PL front, we are hearing from our customers and we're seeing in the pipeline that they're making their way through this gray space and looking for incremental space. We're seeing this mostly from the larger 3PLs. Many of them are unfazed by all the noise in the macro picture, but we're definitely hearing the confidence and we're seeing that pipeline grow. The 3PLs accounted for about a third of our leasing in the second quarter, which is slightly down from the prior two quarters, but those were two quarters in a row of record.

Speaker Change: Now, as we talked about in the back, half of the year, it's prudent to monitor the that uncertainty that macro caution. And so I think full year number should land in the 75 to 100 million square feet range. Yeah, then then the 3pl front, we are hearing from our customers and we're seeing in the pipeline that they're making their way through this great space. And looking for incremental space, we're seeing this mostly from the the larger 3pls. Many of them are unfazed by all the noise in, the macro picture, but we're definitely hearing the confidence and, uh,

We're seeing that that pipeline grow. Uh, 3pl is accounted for about a third of our Leasing

Speaker Change: In the, uh, in the second quarter, which is slightly down from the prior 2 quarters, but those were 2 quarters in a row of Records.

Speaker Change: Thank you. Our next question comes from the line of John Kim with BMO Capital markets, please proceed with your question.

Thank you.

I was wondering if there were any changes to terms of leases signed in the second quarter since Liberation Day, in terms of annual escalators or TIs and free rent. We haven't noticed much on commencements, which was disclosed, but other than term may be coming down a bit.

And also wanted to see if you had any commentary on the $28 million of termination income, and whether or not you expect more in the second half of the With regard to terms, I mean, if you see the lease terms provided in the supplemental, you'll see a lower number there in the context of months. That's mostly a reflection of mixed, because if you look above there, you'll see a lighter volume of development leasing in there. I haven't seen anything abnormal develop with regard to overall lease term length. We've been saying that concessions are normalizing, which does continue, and you also see that reflected in the materials this morning.

John Kim: And also wanted to see if you had any commentary on the 28 million dollars of termination income. And whether or not you expect more in the second half of the year,

With regard to the lease termination fee income, we typically have on the order of $5 to $10 million of such income in any quarter. This quarter was a little bit higher. I would remind you, as you're looking at an item like that, you're seeing one side of it. What you don't see is there's resulting vacancy, clearly, which winds up impacting the balance of the year. Those kinds of knock-on effects are all reflected in our guidance. So that was an unusually high item in the quarter. It was forecasted and contemplated in our previous guidance, and so everything with regard to same store and earnings will be in good shape for the balance of the year.

Sure, you know, with regard to terms, I mean, if you see the lease terms provided in the supplemental, you'll see a lower number there in, in the context of months, that's mostly a reflection of mix, because if you, if you look above there, you'll see a lighter volume of of development leasing in there. I haven't seen anything abnormal develop with regard to overall, at least term length. Um, we've been saying that concessions are normalizing, uh, which uh, does continue and you also see that reflected in the materials, uh, this morning, uh, with regard to the, um,

Yeah, and those payments are exactly what I was talking about in comparison to any downtime that we may experience through tenant defaults and all that. So that number, unlike other cycles, I think it's going to continue to be positive in a good way.

Lease termination fee income. Uh, we typically have on the order of 5 to 10 million dollars of such income, in, in any quarter. This, uh, quarter was a little bit higher. I would remind you as you're looking at an item like that, you're you're seeing 1 side of it. Uh, what you don't see is there's resulting vacancy, clearly, which winds up, um, impacting the balance of the year that those kinds of knock-on effects are all reflected in our guidance. Um, so that was an unusually high item in the quarter. It was forecasted and contemplated in our previous guidance. And uh, so everything with regard to same store and earnings, um, will be in good shape for the balance of the year.

Speaker Change: Yeah, and those payments are exactly what I was talking about in comparison to, um, any downtime that we may experience through tenant defaults and all that. So that number unlike other Cycles. I think it's going to continue to be positive in a good way.

Thank you. Great, thank you for taking the question. Hamid, you listed a long list of fears, you know, prior fears over the last 18 months or so that have gone away. As you talk to your, as everyone talks to their clients today, you know, economists are calling for a much better 26.

John Kim: Thank you.

And our last question comes from the line of Jamie Feldman with Wells, Fargo, please proceed with your question.

Speaker Change: Great. Thank you for taking the question. Um, how many do you you listed a long list of, uh, fears, you know, prior fears of the last 18 months or so that have gone away?

What do you think the key overhangs are on decision making, and just people getting more aggressive? You had mentioned kind of the dam and water building up behind the dam. So what is it?

Speaker Change: As you talk to your as everyone talks to their clients today. Um, you know, the economists are calling for a much better 26.

What do you think the overhangs need to go away or that people are optimistic about in terms of much better times ahead and leasing more space and growth? Bummer. I think if you have people that are pulling the trigger on big capital improvement or capital expenditures, they're going to take comfort by seeing other people make the same decisions. So people want to be in companies, just like investors want to beat the index, people want to be in. Good company. So I think that dynamic and that will shift from being very conservative to being much more aggressive.

What do you think the key overhangs are on decision making and just people getting more aggressive, you had mentioned, kind of the Damned and water building up behind the dam. So what is it, what do you think the overhangs are that need to go away or that people are optimistic about, uh, in terms of much better times ahead and leasing more space and growth.

Speaker Change: Bomo.

I think uh if you have people that are pulling the trigger on big Capital Improvement or Capital expenditures, they're going to take comfort by seeing other people. Make the same decisions. So um you know people want to be in in company just like investors want to beat the index. People want to be in.

I think there's still a degree of worry out there as to are we in an inflationary environment or are we not? The terrorists would argue that you're in an inflationary economy, but the numbers haven't come through that way. There's a lot of confusion right now.

That's why I think it is nearly impossible to predict things quarters in advance. I know you want us to, but it's kind of hard to do it. And anything I should tell you, you should ignore anyway.

So, but I'm feeling really good about the long term prospects.

Good company. So I I think that Dynamic and that will shift from being very conserv, conservative to being much more aggressive. Um, I think there's still a degree of worry out there as to are we in an inflationary environment or are we not that the, you know, tariffs would argue that you're in an inflationary econ economy, but the numbers haven't come through that way. There's a lot of confusion right now. That's why I think it is nearly impossible to predict things quarters in advance. I know you want us to, but it's kind of hard to do it and anything like I should tell you, you should ignore anyway. So, but I'm feeling really good about the long term prospects with business.

So, that brings us to the end of the call. I just want to acknowledge our teams globally for the focus throughout the quarter and delivering such solid results.

Thank you all for joining the call today, and we'll talk to you all very soon. Thank you.

Speaker Change: So that brings us to the end of the call. I just want to acknowledge our teams globally for the focus throughout the quarter and delivering such solid results.

Uh, thank you all for joining the call today, and we'll talk to you all very soon.

And this does conclude today's conference, and you may disconnect.

Speaker Change: Thank you. And this does conclude today's conference and you may disconnect your line at this time.

Speaker Change: We thank you for your participation. You may now disconnect your line.