Prologis Inc (PLD) 2025 Q4 法說會逐字稿

Greetings. Welcome to the Prologis Fourth Quarter 2025 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

And I will now turn the conference over to Justin Meng, Senior Vice President, Head of Investor Relations. Thank you, Justin. You may begin.

Thank you, operator, and good morning, everyone. Welcome to our fourth quarter 2025 earnings conference call. Joining us today are Dan Letter, CEO; Tim Arndt, CFO; and Chris Caton, Managing Director.

I'd like to note that this call will contain forward-looking statements within the meaning of the federal securities laws, including statements regarding our outlook, expectations and future performance. These statements are based on current assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a discussion of these risks. We undertake no obligation to update any forward-looking statements.

Additionally, during this call, we will discuss certain financial measures such as FFO and EBITDA that are non-GAAP. And in accordance with Reg G, we have provided a reconciliation to the most directly comparable GAAP measures in our fourth quarter earnings press release and supplemental. Both are available on our website at www.prologis.com.

And with that, I'll hand the call over to Dan.

Thanks, Justin. Good morning, and thank you all for joining us. We delivered a strong fourth quarter and closed the year with solid financial and operational momentum, driven by disciplined execution and deep engagement with our customers across our markets.

As we build on this momentum, I want to start by recognizing our teams around the world. Their dedication, creativity and customer focus are central to Prologis' success. In a few minutes, Tim will walk you through the details of our results. Before that, I'd like to share a few observations about the business. Across conversations with customers, investors, business partners and our teams, a consistent theme comes through.

Prologis' leadership goes well beyond scale. It's about how we operate, our commitment to excellence, the strength of our long-term relationships and our ability to anticipate what's next. That mindset defines our culture and continues to guide how we lead.

Looking ahead, we're building on that foundation with a clear focus on three priorities. First, extending our leadership as a best-in-class operator, whether it's using data analytics to drive better decisions, deploying site-specific energy solutions or advancing venture initiatives that enhance our platform. Our objective is straightforward: to continue widening the moat that differentiates Prologis. We do that through unmatched service, innovative solutions and the mission-critical reliability our customers depend on.

Second, capturing the significant value creation opportunities ahead of us in both logistics real estate and data centers. Our track record in warehouse development is well established, and we're positioned to deliver the next generation of modern strategically located facilities.

At the same time, advantage today is defined by location, power and scale. With a growing power pipeline, deep customer relationships and multidisciplinary expertise, we are well equipped to develop critical infrastructure few can match. We will approach data centers with the same discipline and long-term perspective that has defined our success over time.

And third, enhancing shareholder returns through continued growth in assets under management. Our private capital partners are increasingly seeking fewer managers who can deliver consistent performance across geographies and strategies, and we are perfectly suited to serve as that partner of choice. We are developing new vehicles and strategies that build on our track record of performance, transparency and partnership, and we're making strong progress. As we enter 2026, we do so from a position of strength and with the strategic initiatives in place to extend our leadership and compound value for our shareholders.

With that, I'll turn the call over to Tim to walk you through our results and outlook.

Thanks, Dan. As mentioned, we are very pleased with our results and closed the year with strong momentum. Our teams performed exceptionally well, signing 57 million square feet of leases in the quarter and driving occupancy toward 96%, further widening our out-performance versus the market. Improved customer sentiment, together with better-than-expected market conditions, reinforces our view that vacancy has peaked and rents are beginning to inflect across many markets.

Momentum extended across the growth areas of our business as well. Our development platform, particularly in build-to-suits, continues to outperform, exceeding expectations and capturing meaningful market share. In strategic capital, we formed two new investment vehicles in the US and China. In our Data Center business, the power pipeline continues to grow, and we expect a solid year of starts.

Turning to our results. Fourth quarter core FFO was $1.44 per share, including net promote expense and $1.46 per share, excluding net promote expense, finishing the year at the top end of both our most recent and inaugural guidance ranges. On an owned and managed basis, average occupancy was 95.3% for the quarter and 95% for the full year, with period end finishing the year at 95.8%.

Results were driven by strong new leasing and healthy retention of 78%. And in the US, we expanded our outperformance versus the broader market to 300 basis points, reflecting the quality of both our portfolio and operating platform.

Net effective rent change was 44% for the quarter, contributing approximately $60 million of annualized NOI and driving net effective rent change for the year to more than 50%. Our net effective lease mark-to-market ended at 18%, representing nearly $800 million of embedded NOI yet to be realized without any increase in market rents. The rate of decline in our lease mark-to-market has slowed considerably and many markets, including several in the US and most across LatAm and Europe are once again seeing expansion as market rent growth begins to outpace portfolio churn.

Finally, same-store NOI growth was 4.7% on a net effective basis and 5.7% on a cash basis, each ahead of the midpoint of guidance. And for the full year, net effective same-store growth was 4.8%, hitting the top end of our range.

Turning to capital deployment. It was another active quarter. We sold approximately $900 million of value-maximized assets and acquired $625 million at attractive discounts to replacement cost, generating between them a positive 150 basis point spread in expected IRR.

On the development front, we started $1.1 billion in new buildings in the quarter, which were all logistics projects and over 48% build-to-suit. For the year, we started $3.1 billion where build-to-suits represented an impressive 61%. It's worth reemphasizing that this success is driven by a deliberate and differentiated strategy, matching well-located entitled land with a strong customer franchise, allowing us to generate attractive returns despite the derisked nature of the projects.

In our Energy business, we delivered another strong quarter lifting total installed capacity to 1.1 gigawatts, achieving and surpassing our 1-gigawatt goal set four years ago. We will build on this progress, adding additional capacity given the significant untapped potential across the portfolio.

Before turning to market conditions, I'd like to highlight that Prologis recently led the creation of an industry snapshot developed in partnership with JLL, Cushman & Wakefield and Colliers. This collaborative effort combines our proprietary research with timely and transparent brokerage data across 34 US markets. You can find the report in the Research section of our website.

Overall, we are progressing through the three stages of inflection we outlined last quarter, evidence of enduring demand, resulting build in occupancy, followed by an inflection in rents. We are now seeing all three at varying stages and paces across our geographies, setting up a constructive 2026.

Fourth quarter net absorption was 59 million square feet in the US, a strong finish to the year and further evidence that demand is both visible and building. Higher absorption levels, which exceeded completions for the first time since 2022, resulted in a decline in US vacancy to 7.4%. The result is that market rents declined at their slowest rate since 2023 with many markets posting positive growth.

Across our portfolio, demand remained the strongest in large space formats, but it's encouraging that occupancy increased across all of our size categories. The tone of our conversations with customers is increasingly forward-looking. While uncertainty is always top of mind, including tariff policy, it is now treated more as a planning assumption rather than an impediment.

E-commerce remains a meaningful driver of this demand, representing approximately 20% of our new leasing activity over the last year, making 2025 its best year since 2021. Large retailers with significant e-commerce operations continue to expand and diversify their networks to shorten delivery times and improve efficiency. Their ongoing innovation and growth, combined with a threefold multiplier in the space required for e-commerce continues to provide a powerful tailwind for our business.

Finally, outside of the US, our international markets continue to outperform. In Latin America, consumption trends in both Mexico and Brazil remain robust, supporting high occupancy and ongoing rent growth. Europe delivered another solid quarter, maintaining strong occupancy and posting its first quarter of positive rental growth in two years. Japan also performed exceptionally well with occupancy above 97% and outperformance relative to the market of nearly 600 basis points. Together, these results highlight that our global footprint is not only strategic and valued by our customers, but also a key driver of the diversity and resilience of our platform.

Turning to capital raising. We achieved two important milestones in strategic capital. First, the IPO of the China AMC Prologis Logistics REIT, as we call it the CREIT on the Shenzhen Stock Exchange, marking our third publicly listed vehicle. Similar to NPR in Japan and FIBRA Prologis in Mexico, the CREIT broadens our access to capital, diversifies our investor base and strengthens our presence in one of the world's most dynamic logistics market. Second, we added a new vehicle focused on development, redevelopment and value-add opportunities, a strategic complement to our open-ended funds focused on stabilized investments.

In the fourth quarter, we held the anchor closing for the US Agility Fund, yet another endorsement of the Prologis platform in a competitive capital raising environment. We have a deep pipeline of capital raising strategies in various stages of formation for this foundational business line. We look forward to sharing additional updates with you as the year progresses.

Moving on to data centers. At its core, this business is centered on four priorities: procuring power, securing build-to-suit lease transactions, delivering world-class facilities for our customers and harvesting value through asset sales. We continue to make clear progress on each front. During the quarter, we expanded our power access to 5.7 gigawatts, stabilized 72 megawatts of projects and sold a state-of-the-art turnkey facility at compelling economics.

In terms of leasing, demand is exceptional and every megawatt in our pipeline is in some stage of discussion, including 1.2 gigawatts currently in LOI or pending lease execution. Our data center team and capabilities are expanding and executing at a very high level, and we're extremely excited by the significant value creation opportunity ahead.

Turning to guidance, which I'll review at our share. We are forecasting average occupancy to range between 94.75% and 95.75%, which includes the expectation for a seasonal drop in occupancy in the first quarter before rebuilding over the year.

Net effective same-store growth is forecasted to be in a range of 4.25% to 5.25% and cash in the range of 5.75% to 6.75% with rent change being the predominant and enduring component of this growth. Our G&A forecast is for $500 million to $520 million, and our strategic capital revenue forecast calls for $650 million to $670 million.

As for deployment, we are forecasting development starts to range between $4 billion and $5 billion on an owned and managed basis. As mentioned earlier, we have increased visibility and confidence around new starts in our Data Center business. So we have included those volumes in this guidance at approximately 40% of the activity. Acquisitions will range between $1 billion and $1.5 billion, and our combined contribution and disposition activity will range between $3.25 billion and $4.25 billion.

In total, we are establishing our initial GAAP earnings guidance in a range of $3.70 to $4 per share. Core FFO, including net promote expense will range between $6 and $6.20 per share, while core FFO, excluding net promote expense will range between $6.05 and $6.25 per share.

In closing, 2025 brought unexpected challenges and periods of uncertainty, and we're very pleased with how the company performed throughout the year. Our teams once again demonstrated the strength and resilience of our platform and the discipline of our world-class operations, delivering strong operational and financial results.

Equally important, we used the year to strengthen the foundation of our business by advancing development entitlements, expanding strategic capital and accelerating our progress in data centers and energy. As a result, we enter 2026 from a position of strength with operating momentum and a setup that supports durable long-term growth.

With that, I'll turn the call back to the operator for your questions. Operator?

(Operator Instructions) Blaine Heck, Wells Fargo.

Dan, can you speak about any changes in strategic initiatives that may come with your leadership at Prologis? And specifically, any thoughts around the strategic capital side of the business and when you might expect to add additional strategies, including a potential data center focused funds? Any information on the scope, potential timing and earnings impact would be really helpful.

Yes. Thanks, Blaine. I highlighted our strategy pretty clearly in my opening remarks here. And what did I say there? First, our focus is centered on compounding the core Logistics business while continuing to broaden and strengthen the platform. Logistics is and will remain the foundation here, serving the consumption centers around the world, capturing the embedded rent growth and lifting rents as markets recover.

And then we'll start leaning more into development where supply is constrained. Data centers and energy, high-return adjacent businesses here, where our land positions, our power access and our customer relationships really give us that edge. We have a very strong customer franchise. And yes, I expect to grow the strategic capital AUM significantly, both through existing vehicles and new vehicles. And really, at the end of the day, it's all about hyper focus on execution for this team.

But Tim, maybe you want to add on something on the new vehicles.

Yes. Blaine, on the data center fund and its prospects, as you know, over the past weeks and months now, we've been dialoguing with some of world's larger investors, and they are ones who would have interest in co-investing in this business. And we've had a very productive couple of months in that regard. There definitely is a lot of interest such that we see capital isn't necessarily the constraint here.

And what we're really after is determining what capital structure makes sense for this business that allows us to take full advantage of all the development opportunities in the portfolio, diversifying projects, but growing the AUM that we're talking about here and enhancing it with fee streams, et cetera, driving ROE.

I'd say we're meaningfully through that process at this point. We expect to know more in the coming weeks and months. But it's something at the same time, I'll say we're taking care to get right given the scale of the opportunity. So in the meantime, the balance sheet has been comfortably carrying out the program that we have. It's been very profitable. So we'll compare these alternatives to that status quo. And as we have more news for you, we will share it out in the coming months.

Michael Griffin, Evercore ISI.

Tim, I appreciated your comments kind of walking through the puts and takes of your expectations in 2026. Wondering if you can dive a little bit deeper into your assumption around market rent growth and maybe if you're able to kind of quantify it for us in terms of what you're forecasting for the year ahead. It seemed like some markets are hitting an inflection point. You've still got a healthy mark-to-market. So is this a scenario where maybe market rents are down in the first half of the year and then improve as we get to the second half? Just maybe walk us through some commentary there, that would be great.

Yes. Let me pass that over to Chris.

Michael, let me give you the full fundamental forecast for '26 so that you have all the context you need to make that judgment. The key message here is market vacancies are poised to improve over the course of the year. Now that already began in the fourth quarter when net absorption outperformed completions, and I anticipate '26 will play out the same way. New demand is the key variable here, and we expect net absorption to approach 200 million square feet in '26 versus 155 million last year. Decline in supply is helping.

Deliveries are on pace to be 185 million, 180 million square feet in 2026, down from 200 million square feet last year. So that will take vacancies, which were at 7.4% at the end of last year towards 7.1%, 7.2% at the end of this year. And so you're right, markets are advancing at different rates.

Tim described rent demand improving, occupancy levels beginning to improve across a greater range of markets and ultimately, rents. So we expect positive rent growth in aggregate to begin to emerge in a more clear way over the course of the year.

Craig Mailman, Citi.

Just want to hit on the data center piece real quick. I think, Tim, you said that you have 1.2 gigawatts in LOI or advanced negotiations. Can you just walk through kind of how many projects that would be? And how that's reflected in the development start guidance? I noticed you guys, for the first time, aggregated warehouse and data center. So give us a sense of like how much of that start guidance is data centers versus warehouses and if this 1.2 gigawatts is sort of a near-term opportunity or '27 and '28, too?

Yes. I won't break it down by project for you, Craig, but we have a small handful, I'll describe it that way, of starts that feel relatively imminent given the stage of leasing I just described them in. So I expect you'll see something this quarter in starts and certainly in the first half, and maybe a couple there.

In the guidance, I described that 40% of our overall owned and managed range of $4 billion to $5 billion, we expect 40% of that roughly to be in data centers. So you can unpack that and understand the logistics piece. And I think -- I will say, I think there's -- we've left some opportunity to outperform this in a few ways, both in logistics and in data centers.

On the logistics side, I would say that what you infer there on logistics starts is still below what a very strong run rate would be for us. We could see that the environment for spec starts continues to improve, and that would be a means for outperformance on those starts.

And on the data center side, I would bear in mind that it's not only going to be in a project count, if you will, that we execute on, but also format. We have a mix that we think about between powered shell and turnkey and the appetite for turnkey projects is quite high from our customers. And if we choose to execute more in that format, the aggregate dollars would rise as well.

Let me just pile on here. We've often talked about a wide range of deployment that we can do throughout the year. We own land in over 70 markets around the world. And as we talked about, $42 billion worth of opportunity in that land bank, of which nearly 40% of that is ready to go. So we can really make a decision in a moment's notice as it relates to starting. So we have a lot of opportunity, as Tim mentioned.

Caitlin Burrows, Goldman Sachs.

Maybe another data center question. So just a year ago on the 4Q '24 call, you guys mentioned that you could reach 10 gigawatts of power in 10 years. I guess now we're one year later and you're already at almost 6 gigawatts. So I was just wondering if there was any update on that kind of 10-gigawatt outlook or trajectory?

And do you think the pace of increase could keep going? Might it slow down because future increases in power are increasingly more difficult? Or just -- how do you expect that to trend?

Caitlin, I would say when we talk about the 10 gigawatts of power, what we've talked about is just the universe of opportunity that we have. We own 6,000 buildings adjacent to the world's most dynamic consumption centers. We own or control 14,000 acres of land. And it's really lumpy as to when these sites will be ready, will be energized. And that's why we're updating you as soon as we know on what's coming. But I'm very comfortable stating that 10-gigawatt of pipeline, and there's just a lot behind that, that is further down the road, but no update further from that number.

Vikram Malhotra, Mizuho.

I want to just clarify two things just based on your comments, which seem like we're moving from this bottoming to an inflection phase. So one, I guess it's been hard over the last three years to predict sort of this inflection in occupancy. So what gives you strength as you see this downtick in the first quarter to build a fair amount of occupancy to hit your guide?

And then related to that, as you get this strong core growth, what -- can you walk through some of the offsets that limit the FFO growth this year?

Vikram. Well, look, on occupancy, I think the first thing that is worthy of remembering is that the past few years now of absorption is what has been the outlier. We've had very low years of annual absorption in our markets. So even with Chris' forecast of approaching 200 million square feet, we'd still call that not fully normal or robust. So I think that's useful context perhaps.

The remainder is, look, I think our guide is for about 25 basis points increase in average, also maybe not as extreme as you might be reading into. But finishing the year at 95.8% and building occupancy over the course of the year, to answer your direct question is what gives us a good amount of confidence in the forecast that we have here.

Samir Khanal, Bank of America.

I guess, Tim, occupancy had a nice pickup in Europe and Asia in 4Q. I think you talked a little bit about Japan, but maybe can you provide some color on kind of the big pickup there in occupancy and sort of what's driving that?

Samir, I would say, I would look back across the year, probably '25. The Europe story and definitely the Japan story are not new. We've tried to highlight that a few times in recent quarters. Occupancies there in the market have been pretty strong in Europe, at least. Japan is a different story at the market level. But our portfolio in both cases, has been quite high and has been that way for quite a while now. Anything you would add, Chris?

No, that's right. I'd say momentum is building around the world. So ex US has more momentum, healthy demand, lower vacancies.

Ronald Kamdem, Morgan Stanley.

Great. Just had a broader question on capital deployment, both on the data center and the traditional sort of industrial side. If you could just walk us through just what that potential pipeline looks like in terms of the ramp and what you need to see to sort of increase the run rate, specifically on the industrial side?

Yes, Ron, I'll start and maybe Tim will chime in here. But as I mentioned, we have significant number of opportunities. Good news is we saw this real estate cycle continue in the fourth quarter, as Chris mentioned in his prior remarks, we're seeing -- really starting to see better activity in really all size ranges. It's not just a big-box story, or at least fourth quarter wasn't just a big-box story. So we can watch these markets literally by the week and month and make decisions on the fly and ramp accordingly.

Yes. I would only say, Dan, that's precisely right. And Ron and maybe I would, to give a different context, it really is built up week-by-week at investment committee as teams are deciding conditions in their respective markets are appropriate. It's not something that we govern top down.

Nick Thillman, Baird.

Maybe touching still on the development starts on the industrial side. Is it fair to assume that you still have a little bit more bias ex US in that market?

And then as we think of the land bank overall, you guys have alluded to the mark-to-market upside, but then replacement cost rents. I guess as we look at the bank -- land bank overall, what percentage of that bank do you think is in the money when it comes to new construction like barring -- or if the demand is there, like what percentage of that would you say is in the money at this point on new starts here?

Well, I'll take the second part, and Dan can pick up the geographic mix maybe after. It's a challenging question to unpack the way you're phrasing it. I guess what I would tell you is that we evaluate the valuation of the land bank every quarter, and we continually read out to you how we see that. Presently, we see that around 110% fair market value to book value. So that is going to be a mix of projects that are more deeply in the money than others, but I can only provide you the information on that aggregate basis.

And then as it relates to geographies, about 2/3 of the starts that we're assuming for the year on the logistics side are in the US for 2026. That's up about 10%, 15% year-over-year. And then we're seeing strong markets in Latin America between Sao Paulo, between Mexico, I'd say not the border markets of Mexico, but Mexico City. And then if you go over to Europe, we're seeing -- we'll see some starts in Germany, Netherlands, Northern Europe mostly.

Vince Tibone, Green Street.

I have a few more questions on the data center opportunity. On the 1.2 gigawatts you mentioned are under LOI, would those be mostly powered shell or turnkey? I'm just trying to get a sense of the total investment for that power.

And then could you also clarify just what exactly it means to be kind of in advanced stages of procurement for power? I mean it's just everything we hear it is taking longer and longer to get power from the utility. So I'm curious like how far out that stuff that's in advanced stages may take before power could be delivered? Like is it -- because you have commitments for that power, but it may be three to five years, if not more, until it's actually delivered? Just trying to get a sense of both those points.

Vince, I would -- I'm going to answer your first question in a more generic way that we think of the program overall as likely being on the order of 60% to 70% powered shell and having some amount in our forecast reserved for full turnkey. The deals that are in the near future are still working through those discussions. And we've seen -- it may be surprising, but we've seen even in late stages or mid-build customers decide to transition from powered shell to full turnkey. So that's why it's a little squishy right now. But to widen you out to think about the entire initiative, think about 60% to 70% powered shell.

And Vince, to your question around what defines advanced stages, what's secured? Advanced stages, it's the point when a project has a preliminary utility agreement that really signals progress towards like a firm power agreement. It's really just pending the final design and construction with the utility. There's significant capital that's been outlaid at that point, and it's definitely a defined path to securing that firm power. That often happens after many -- 12, 18, 24 months of negotiations with these utilities. And then it typically takes another year to two to get to that secured stage. And then we consider secured power is when the data center project has a binding agreement through the form of an energy service agreement with the utility, and that's guaranteeing power delivery and committing to build that necessary infrastructure.

Michael Goldsmith, UBS.

Despite what was a particularly volatile year in 2025, you still ended up at the high end of your initial core FFO like promote guidance, which suggests stability in the algorithm, but the spread for the outlook in 2026 is even wider. So is there anything that would add more sensitivity or a wider range of outcomes this year? And then as well, Southern California lease percentage picked up 140 basis points. So if you could touch on the health of that market, that would be appreciated.

Michael, it's Tim. On your first question, I would think of it more as math, to be honest. We're just getting to earnings per share, FFO per share here. That's quite a high number crossing over $6 now. And if you just think of variability in percentage terms, the penny range that we provide needs to move with that growth and widens out. It's just natural.

Michael, it's Chris. On Southern California, great pickup. There has been a tone shift in Southern California worth discussing. So look, let's acknowledge Southern California has been a soft market and market vacancies are elevated there, but there is a new direction in customer demand, and it's giving us confidence in the call that we've been consistent in making in terms of the opportunity for cyclical recovery to emerge.

What I'm specifically looking at is in the back half of the year, and so both in the third and fourth quarters, gross absorption and net absorption went in a different direction in an improved direction. Customers are engaging earlier in renewals. There's broader discussion of new lease requirements across all submarkets from a wider range of customers.

And as it relates to submarkets, we often get asked that question, and there is still some nuance as we pass -- as we approach this inflection point. Inland Empire is clearly outperforming Los Angeles. There's great improving net absorption in that geography. Class A over Class B is outperforming. That's a positive for our portfolio. And in fact, there are a couple of pockets where there's some scarcity and healthy customer demand that's leading to firming and improving pricing. So I'm thinking really big box in the Inland Empire. Putting it together, the cycle is progressing and short-term weakness is dissipating.

Mike Mueller, J.P. Morgan.

Do your fund contribution expectations for '26 reflect just ongoing development activities for warehouses? Or does it factor in any contributions for the new vehicles?

The only thing included in the contribution guidance is -- that we contemplate for the year is that the Agility Fund that I mentioned in my prepared remarks, before it starts some of the development activity it will undertake in the year, it will take some contributions of land from Prologis, marked up to fair value is the way that will operate, and that is reflected in the guidance.

Nicholas Yulico, Scotiabank.

Tim, in terms of the guidance on same-store growth this year, I was hoping you could just unpack that a little bit in terms of the acceleration in same-store growth this year, is that just being driven by easier occupancy comps? Or are you also expecting some improvement in mark-to-market that you can capture?

Yes. It's going to be -- let's break it apart. On the rent change piece or the mark-to-market, as you mentioned, that will be a decreasing factor as rent change amounts get a little bit more normalized. We had 50% rent change in 2025, as I mentioned, and you can unpack and infer by looking through the supplemental, will be in the high 30s or roughly 40% in 2026 as you evaluate market rents for our discussion of where they sit in our lease mark-to-market. So that will be a smaller contributor, a long way of saying occupancy drag will be a little bit less.

One of the predominant factors is just [lighter FPLA] really from the Duke acquisition. That does have a long tail. I'll say that is still dragging net effective same-store growth by 75 to 100 basis points, and it will be with us for a few more years, but it does slowly reduce over time.

Todd Thomas, KeyBanc Capital Markets.

I wanted to go back to the capital deployment, ask about something at a little bit of a higher level. You previously talked about deployment drag in '26, just given lighter levels of starts in '24 and '25, which has impacted FFO growth to some extent in the near term. Can you talk about the cadence of stabilizations during the year and comment on whether you see that accelerating or increasing as the year progresses? I'm just wondering if you can talk about the magnitude and impact of that drag within the '26 guidance and whether you expect that to begin alleviating as '27 approaches?

Yes, Todd, I think the best disclosure on this is present in the sup with regard to the pipeline overall, and we do demark what years of stabilization of projects fall into. We don't provide it out by quarter. That's just a lot of detail for one. But on the speculative side, it's going to be subject to when leasing is being achieved.

Perhaps just to help you, if you wanted to unpack some breadcrumbs from prior year starts, which we give you quarterly, I'd say our Spec business is typically leasing up between seven and nine months. Long-term average would be seven. Recent years have been a little bit longer. I expect to see that tighten as market conditions do. And then build-to-suits, of course, come online immediately at project completion.

Brendan Lynch, Barclays.

Another follow-up on the data center side. Can you discuss the 5-plus gigawatts of power that you have access to and how fragmented that power is dispersed either geographically or even conceivably by asset and where the largest blocks are that you have?

Yes, sure. So our land and the power bank, if you will, it is distributed across Tier 1 and Tier 2 markets across the US and Europe. That's Northern Virginia, that's Silicon Valley, Chicago, New Jersey, Dallas, Portland in the US is Tier 1. It's the FLAP-D markets. Literally, we've got Amsterdam, London, Paris, Frankfurt, Dublin that we're working. And then Tier 2, we've got a number of sites as well, Austin, Las Vegas, Phoenix, Salt Lake City, Boston, Denver and then Madrid, Milan and Berlin in Europe. So very dispersed, a wide range of opportunities here.

John Kim, BMO Capital Markets.

I wanted to follow up on what's incorporated in same-store guidance in terms of the occupancy growth of US versus international markets? Will that international outperformance continue? And also what you're expecting from solar contribution, given there wasn't much contribution last year, but we're one year closer to $1 billion Essentials revenue target that you're expecting by 2030?

Yes, John, the occupancy gains that I would see in same-store are relatively dispersed across our geographies. There's more weight coming out of the US generally, of course, but the levels of improvement even at the market level as we think about Chris' absorption are kind of uniform in basis point terms between those geographies.

Solar revenues, I'm glad you highlight. It is in NOI. We're very proud to have surpassed that 1 gigawatt goal. By the way, I'd like to mention again. The growth you see there, while impressive on its own, it's just at a nominal level, to be frank, that it kind of pales in comparison to $6 billion, $7 billion of NOI from rental operations we have now, but that will continue to grow from here and become a much more meaningful contributor in future years.

This now concludes our question-and-answer session. Now I would like to turn the floor back over to management for any closing comments.

Thank you for joining us today. We appreciate your interest in the company. We look forward to connecting throughout the quarter or during next quarter's call. Take care.

And ladies and gentlemen, thank you for your participation. That does conclude today's teleconference. Please disconnect your lines and have a wonderful day.