Prologis Cools Its Forecast as Tariff Tensions Shake Warehouse Market

The company continues to show restraint in speculative building, reflecting caution in a sector facing oversupply pressure.

Jordan B.
April 18, 2025

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Good morning. Prologis is pulling back on its development pipeline by over $1B despite a strong Q1, as global tariffs and tenant hesitation begin to chill industrial leasing activity.

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SCALING BACK

Prologis Scales Back Development Amid Leasing Slowdown

Prologis is trimming more than $1B from its 2025 development pipeline

The industrial giant is trimming more than $1B from its 2025 development pipeline as global tariff uncertainty slows tenant decision-making and leasing momentum.

Earnings report: Prologis reported a strong Q1, with revenue up 9.5% year-over-year to $2.14B. Nearly 58M SF of leases, along with continued growth in its data center and solar businesses, fueled the gains. But following sweeping tariffs announced in early April, momentum cooled—and so did Prologis’ development outlook.

Recalibration: The company is pulling back on expansion in response to market volatility:

Development starts cut from $2.8B to $2B
Stabilizations trimmed by $350M to $2.3B
Contributions and dispositions each revised down by $500M
Acquisitions budget unchanged at $750M–$1.3B

Leasing pulse: Leasing activity is slowing, but far from stalling. Prologis signed 21M SF in new leases and 42M SF in renewals during Q1. In April, volume dipped 20%, yet 6M SF was still closed across 80 deals. Leasing negotiations remain active, with 108M SF in progress—the highest since 2019.

Tenant sentiment: Tariff uncertainty is lengthening decision timelines. Average lease gestation rose to 64 days as tenants tread carefully. Still, many can’t hold off much longer. Amazon, Prologis’ top tenant, is back in the market, and e-commerce users accounted for 20% of Q1 leasing—a sign of underlying demand.

Filling spaces: Occupancy remains strong at 95% across the company’s 1.3B SF portfolio. Net effective rents surged 53.7% year-over-year, though the pace has slowed for four straight quarters. With 345M SF of new supply still hitting the market, rent growth is likely to cool further as tenants gain leverage.

➥ THE TAKEAWAY

Looking ahead: Tariffs may be rattling supply chains, but they’re also reshaping demand. As companies reroute shipments and seek overflow space, Prologis sees a silver lining: in a fragmented, uncertain world, more warehouse space—not less—may be the new normal.

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✍️ Editor’s Picks

At a crossroads: Register for the Real Estate Symposium at Harvard on April 26 for fast-paced, interactive forums with industry experts on urgent topics such as office-to-residential conversions. 10% off with CRE Daily discount today! (sponsored)
Vacancy tax: California lawmakers are considering Senate Bill 789, which would impose a $5/sf annual tax on commercial properties vacant for 182+ days, aiming to curb blight and fund housing..
Zoning jam: Nashville’s $3.1B “Choose How You Move” transit plan is facing headwinds from restrictive zoning, with a new Urban Institute study urging reforms to avoid pricing lower-income riders.
REIT strength: Despite early April’s tariff-driven market volatility, REIT stocks remained surprisingly stable, with their diversified income structures and long-term leases.
Yield hunt: Archway Capital has launched a $100M CRE debt fund targeting loans, distressed assets, and preferred equity plays across asset classes.

🏘️ MULTIFAMILY

Land of opportunity: Opportunity Zones have fueled a sharp rise in multifamily development, with apartment construction in these areas up 151% since 2017.
Pricing crackdown: Colorado is advancing a first-in-the-nation bill to ban rent-setting algorithms, citing concerns over tech-enabled price coordination and rising lawsuits against firms like RealPage.
Campus upgrade: UC Santa Barbara’s new $624M student housing plan has won key approval, with a design focused on natural light, ocean breezes, and outdoor living.
Brooklyn build: CAMBA’s $238M Clarkson Estates in Flatbush has topped out, adding 328 affordable units under New York’s Vital Brooklyn plan.

🏭 Industrial

Industrial infusion: McCraney Property Co. secured $55M in non-recourse financing for a three-asset industrial portfolio across the Southeast, reflecting strong lender appetite in a rebounding CRE debt market.

🏬 RETAIL

Broadway bet: Vornado secured a $450M refi for its Times Square JV, using most of the funds to redeem preferred equity and double down on one of Manhattan’s prime retail blocks.
Loan freeze: Brookfield’s $885M loan refinancing was put on hold as market volatility and weak investor demand disrupted the deal despite sweeter terms from Wells Fargo.
Fire sale: BH Properties bought the first fire-damaged commercial site in Pacific Palisades for $1.5M, signaling early investor confidence in the area’s recovery.

🏢 OFFICE

HUD downsizing: The Trump administration is putting HUD’s DC headquarters up for sale, aiming to offload the costly, underused building as part of a broader plan to shrink the federal real estate footprint.
Tower takeback: New York Life is eyeing a distressed loan tied to 353 Sacramento Street in San Francisco, potentially seizing the tower at a steep discount of up to 66% from its last sale price.
Desert drag: Phoenix’s office market is off to a slow 2025, with minimal construction starts, low transaction volume, and prices well below the national average.
Power move: Brookfield sold 701 Ninth St. NW in DC to Exelon for $175M, marking a strategic asset return to the utility giant.

🏨 HOSPITALITY

Historic reboot: Peachtree Group has provided a $36.1M refi loan for a Houston office-to-hotel conversion to transform the historic Melrose Building into the 250-room Le Meridien Houston Downtown.

📈 CHART OF THE DAY

While national apartment supply has largely peaked, 13 of the 50 largest US markets are still on track to hit their highest supply levels in late 2025 or beyond. These upcoming peaks are generally modest, with most adding less than 2% to local unit counts.