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Greetings and welcome to the Prologis Q1 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal 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 Justin Meng, Senior Vice President, Head of Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Welcome to our first quarter 2026 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 Federal Securities laws, and including statements regarding our outlook, expectations, and future performance. These statements are based on the 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 not GAAP. In accordance with Regulation G, we have provided a reconciliation to the most directly comparable GAAP measures in our first quarter earnings press release and supplemental.

Both are available on our website at www.prologis.com. With that, I will hand the call over to Dan.

Thank you, Justin. Good morning, and thank you for joining us. We entered 2026 with solid momentum, and we saw that continue in our first quarter results. While the geopolitical backdrop has become more uncertain in recent weeks, our business continues to perform at a very high level, supported by resilient demand, disciplined execution, and the strength and scale of our global platform. Last quarter, we outlined our top three priorities for the business. Let me highlight how our strategy is translating into results across operations, value creation, and capital formation. First, we delivered another quarter of record leasing with 64 million sq ft of signings, supported by both strong retention and healthy new leasing activity. Occupancy exceeded our expectations, and we are raising our full year outlook.

Second, we are putting our land bank to work across logistics and data centers with $2.1 billion of starts in the quarter, of which $1.3 billion was data center build-to-suits. The depth of customer interest for our data center offerings is significant, and we believe our ability to bring together land, power, and development expertise is a key differentiator for our business and positions us to capture a growing share of this opportunity. Third, we are expanding our strategic capital platform. We announced a $1.6 billion joint venture with GIC, and subsequent to quarter end, a $1.2 billion joint venture with La Caisse. These partnerships reflect strong investor demand for our platform and our ability to deploy capital into high-quality opportunities worldwide. Taken together, these initiatives reinforce a simple point. We're building a broader, more resilient platform, one that is positioned to compound growth over time.

Before I pass the call to Tim, let me briefly address the geopolitical backdrop. The conflict in the Middle East has introduced yet another source of economic uncertainty, most directly through higher energy prices and renewed pressure on inflation and interest rates. Rather than speculate, I'll focus on what we are seeing in our data, what we are hearing from our customers, and how we are operating the business. Our lease signings, proposal volume, and build-to-suit pipeline point to continued strength in underlying demand. In fact, March was a very active month for new leasing. By comparison, when our business faced abrupt tariff related uncertainty in April of 2025, the pause in leasing activity was relatively immediate before thawing out in the following weeks and months. At the same time, our customer insights are grounded in direct, ongoing engagement with hundreds of real-time interactions each quarter.

Seven weeks into this conflict, most are actively monitoring the situation, and they are telling us 2026 business plans are unchanged. The risk today is that uncertainty slows customer decision-making. We have not seen meaningful evidence of that to date. That said, we are operating with a heightened level of awareness, guided by the same discipline that has defined our business for decades. This is a time-tested platform, and the structural drivers of growth across logistics, digital infrastructure, and energy remain firmly in place. With that, I'll hand the call to Tim to walk you through our results and outlook.

Thank you, Dan. Turning straight to our results, we delivered a solid quarter, executing well against our strategic priorities in a dynamic environment. First quarter Core FFO was $1.50 per share, including net promote expense, and $1.52 per share excluding this expense, each ahead of our expectations. We ended the quarter with occupancy of 95.3%, reflecting the seasonal drop we telegraphed and typically experience each first quarter. Retention remained very strong at nearly 76%. Net effective rent change was more muted this quarter at 32%, driven primarily by market mix. Our expectation for full year rent change to approach 40% on a net effective basis remains unchanged. Our lease mark to market ended the quarter at 17% on a net effective basis.

The rate of decline has slowed meaningfully, due in part by an uptick in market rents this quarter, the first increase in two and a half years. Our lease mark to market represents approximately $750 million of embedded NOI at spot rents, which of course do not reflect the replacement cost rent upside, which should materialize over time as occupancies improve. Same-store NOI growth was 6.1% on a net effective basis and 8.8% on cash. In addition to the year-over-year occupancy increase and the growing contribution of rent change, the period also benefited from unusually low bad debt. In terms of capital deployment, we had a fantastic quarter. We started $2.1 billion of new development, including $850 million in logistics and $1.3 billion in two data center projects.

Within logistics, approximately 75% of the starts were speculative, reflecting improving fundamentals in our confidence in the need for new supply across many of our markets. Our data center starts totaled 350 MW between one ground-up development at an existing campus and one conversion out of our portfolio. Both projects are pre-leased on a long-term basis to leading technology companies with strong investment-grade credit. Customer interest in our power sites is exceptional, with 1.3 GW under LOI and all of our power pipeline in some level of discussion. We ended the quarter with 5.6 GW of energy, either secured or in advanced stages, which reflects the stabilization of another 150-MW facility during the quarter. Simply assuming a power shell format at $3 million per MW, our current pipeline could provide well over $15 billion of investment in multiples of that in a turnkey format, creating significant potential for value creation.

Continue to scale our solar and storage business, meeting customer demand and completing 42 projects during the quarter, bringing us to a total of 1.3 GW of installed capacity. In terms of capital recycling, we sold or contributed approximately $1.2 billion of assets during the quarter. This included initial activity within the U.S. Agility Fund announced last quarter, as well as seed assets for our new venture with GIC. Before turning to our markets, I'd like to take a moment to highlight that we marked the 10-year anniversary of Prologis Ventures, our corporate venture capital arm. We've now invested $300 million across more than 50 companies, providing visibility to emerging technologies and solutions in the supply chain to stay ahead of disruption, drive innovation, and discover new opportunities.

Overall, we progressed further through the stages of inflection with demand strengthening, vacancy topping out, and an increase in the number of markets providing positive rent growth. Our U.S. markets absorbed 45 million sq ft, a solid result on a seasonally adjusted basis, slightly ahead of our forecast and consistent with our own leasing experience in the quarter. The U.S. vacancy rate was flat sequentially at 7.5%, aided by lower completion levels as the construction pipeline remains favorable at just 1.7% of stock compared to a 10-year average of 2.6%. We still expect relative balance between supply and demand, which would allow vacancy to drift lower over the year. Globally, market rents grew 30 basis points during the quarter. Barring an economic slowdown, we expect growth to continue, although it may be uneven quarter-to-quarter as conditions firm.

In the U.S., the strongest growth remains in many of our central and southeast markets, while Latin America, Western Europe, the U.K., and Japan stand out internationally. Southern California is performing in line with our expectations, which is to say it is improving but will lag other markets. We're seeing stronger leasing activity and a more constructive tone from customers, and vacancy has increased modestly and rents have declined slightly. Again, both consistent with our outlook as the market continues to progress through its earlier stages of inflection. Moving to our customers, our recent leasing has been supported by a broader mix of transactions across both size, category, and geography. Even after delivering record leasing in the quarter, our pipeline has not only replenished, but in fact reached new highs, reflecting strong underlying and ongoing demand.

With large space format now essentially sold out in our portfolio, we're seeing activity broaden into other unit sizes alongside strength in our build-to-suit demand. Our pipeline continues to be healthy. From a segment perspective, demand remains strong in essential goods and e-commerce, with increasing momentum among data center suppliers. Decision-making is marginally slower, but leasing activity remains robust, and we have not seen any meaningful evidence of pullback. In capital markets, transaction volumes have increased with an encouraging amount of product currently in the market across core-plus, and value-add strategies, and spanning both single asset and portfolio transactions. What stands out is the pricing premium for quality. Assets with strong locations, functionality, and credit are attracting the deepest buyer pools with cap rates on market rents around 5% and unlevered IRRs in the mid sevens.

Turning to strategic capital, we closed commitments for three additional vehicles, including a new venture with GIC, which will develop and hold U.S. build-to-suit opportunities and an expansion of our relationship with La Caisse through a Pan-European venture focused on both development and acquisition strategies. We also launched a new acquisition vehicle in Japan. Between these ventures, as well as the Agility fund and CRE closings announced last quarter, we've raised over $2.6 billion of third-party equity, aligning capital with growing investment opportunities in a more accretive format. Finally, in our balance sheet, we raised $5.5 billion in new financings during the quarter at a weighted average rate of approximately 3.75%. This includes the $3 billion recast of one of our three credit facilities at a spread of just 63 basis points, the lowest of any REIT.

Turning to guidance, which I'll review at our share, we are increasing our forecast for average occupancy to a range of 95%-95.75%. This increase, together with our first quarter outperformance, drives our expectations for net effective same-store growth to 4.75%-5.5%, and cash growth to 6.25%-7%. Strategic capital revenue is now expected to range between $660 million-$680 million, and G&A is expected to range between $510 million-$525 million. As for deployment, we are increasing development starts to $4.5 billion-$5.5 billion. This on an owned and managed basis with approximately 40% allocated to data center build-to-suits. Acquisitions will continue to range between $1 billion-$1.5 billion, and our combined contribution and disposition activity will range between $3.5 billion-$4.5 billion, all at our share. Putting it together, our strong start has us increasing our outlook on earnings.

Net earnings will range between $3.80-$4.05 per share. Core FFO, including net promote expense, will range between $6.07-$6.23 per share, while Core FFO excluding that promote expense will range between $6.12-$6.28 per share, an 80 basis point increase from our prior midpoint. In closing, the strength of our business is evident against a backdrop of ongoing volatility. We are anchored by a portfolio of irreplaceable assets, generating durable and growing cash flows, a disciplined approach to capital deployment, a scaled asset management platform, and a fortress balance sheet. At the same time, we continue to expand in our adjacent businesses in energy and data centers, providing additional avenues for growth. We're excited by the strong start we've had, are proud of our team's execution, and are well-positioned to deliver excellent results over the balance of the year.

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

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Your first question comes from Ronald Kamdem with Morgan Stanley. Please state your question.

Great. Congrats on the record leasing in the quarter. I think I heard you mention that the pipeline is also back at record. I guess my question is just on the leasing spreads that looks like slightly decelerating in the quarter. Just any comments there and how you guys are thinking about occupancy versus pricing going forward for the rest of the year? Thanks.

Hey, Ron. Yeah, the quarter I'd mentioned there was some mix going on in the numbers you see of 40% of the roll by happenstance happen to be in our west region in the U.S. where we have some softer conditions and lower lease mark to market, as you're aware. So that impacted both rent change and things like free rent that you'll see in the sup. In terms of balancing around occupancy and rent change, it's really not only market by market, it's really deal by deal, I would say, out there. We have a pretty wide mix of market conditions, as you know. Some exceedingly tight and some still soft, and that can happen at the sub-market or even the unit level. So I'd say in aggregate, we are in a mode of pushing rents in a number of markets and situations, but still preserving for some occupancy.

Thank you, Ron. Operator, next question.

Your next question comes from Michael Griffin with Evercore ISI. Please state your question.

Great, thanks. Just wanted to ask on the data center development leasing front, it obviously seems like some good news announced in the quarter, but, I mean, is there a worry we've heard things in the news around data center development opportunities around the country getting shelved or local municipalities pushing back? Is that a risk for this pipeline, or do you feel for these projects you've got underway, even with the secured power, that you're able to go forward and lease these and ultimately create that value that you've been talking about?

Yeah. Michael, this is Dan. Our pipeline in the build-to-suits for data centers is very strong. You saw these two starts that we announced this quarter. We've been guiding for the year for the first time on what we expect to see. We've got 1.3 GW of deals under LOI, and we're making further progress converting the pipeline. I feel really good about what we have going, and I think that accounts for the next three years worth of business. Everything we're hearing from our customers is they need this space.

Thank you, Michael. Operator, next question.

The next question comes from Craig Mailman with Citi. Please state your question.

Thanks. It's Nick Joseph here with Craig Mailman. Appreciate the added disclosure on the data centers. What are the assumed development margins on the new starts this quarter? I think in the past, you've talked about 25%-50% margins. How do these starts compare to that range?

When you look at our start volume for the quarter, that obviously is a blend of both our logistics. That includes build-to-suits, it includes spec. We've more spec going on this quarter than we've had the last several quarters. Then on the data center fronts, I would keep it within the range that you've heard us talk about the last few years. It's 25%-50% better or higher than what you see in our typical logistics margins.

Thank you, Craig. Operator, next question.

Your next question comes from Blaine Heck with Wells Fargo. Please go ahead.

Great, thanks. It seems as though average occupancy outperformed expectations during the quarter. I know you guys raised the guidance slightly, but given that the occupancy guidance doesn't leave much upside from Q1, is there anything kind of timing related that happened such that we could see some more downside in Q2 than was initially expected? Or is there just maybe some conservatism in that guidance since we're still early in the year and as Dan mentioned, visibility is somewhat more challenged.

Hey, Blaine. We outperformed average occupancy by around 20 basis points in the quarter. You see a lift in our full year using the midpoint of our guidance of around 3/8 of a point. In excess of that. That reflects two things. There is, one, some pulling forward of occupancy. Mainly that's going to manifest in the form of surprise renewals, that kind of thing, and then also reflects the strength of the pipeline. As I mentioned, we had a lot of activity both in signings, that's half of it, but then the overall size of proposals outstanding today is large enough that gives us the confidence for the rest of the piece of that raise.

Thank you, Blaine. Operator, next question.

Next we have Andrew Burger with Bank of America. Please go ahead.

Great. Good morning. Sounds like 1Q net absorption was a bit ahead of your expectation. Could you just share your latest views on the fundamental outlook for 2026?

Yeah, sure. It's Chris. Our view is unchanged. We're moving through the inflection phase, as Dan and Tim described in the script. There's very little change to our view. That's net absorption on pace to approach 200 million sq ft and completions, 190 million sq ft this year. That'll see rents and occupancies, market rents and occupancies improving over the year. Like you proposed there or like you described, Q1 was modestly better. We're going to hold our core assumptions. This is a macro landscape that's going to evolve over the course of the year. It'll be shaped by the magnitude and duration of the conflict in the Middle East. Our outlook is balancing that risk against what we see, which is resilient customer demand, as Dan described in his prepared remarks.

We also leverage the economic consensus, and they have been marking to market their view, taking it down 20, 30, sometimes 40 basis points in the back half of the year. Look, stepping back, the baseline view is intact and there is ongoing momentum in the marketplace.

Thank you, Andrew. Operator, next question.

Next we have Nick Yulico with Scotiabank. Please go ahead.

Thanks. I just wanted to turn back to some of the market commentary, which was helpful. I wanted to see if we could get a little bit more details on some of the U.S. laggard markets. I know you already talked about Southern California, but perhaps New York, New Jersey, other markets that maybe aren't outperforming. What kind of needs to change to get better rent growth there? And then in terms of the European exposure, if you could just also talk about non-U.K. countries and sort of latest feeling you're hearing from customers, since there is a lot of questions about how energy prices in Europe could affect the economy over there. Thanks.

It's Chris. I'll jump in. First off, in the U.S., there are three or four things to reflect on. Number one, there is a growing range of healthy geographies in the U.S. Places like Texas generally. Houston and Dallas are either strong or healthy. Atlanta, and increasingly some of the Midwest markets. I'm thinking about Columbus, I'm thinking about Indianapolis. There's that strength that Tim described in his prepared remarks. You asked specifically after soft markets. The two softest markets are probably L.A. County and Seattle in the United States. Those are areas where vacancy rates are very elevated relative to history. The pace of incoming demand is muted, and so the recovery is yet to play out there. In terms of some core markets, you asked after New York, New Jersey. I'd also throw in San Francisco Bay Area.

These are areas where we're upgrading our views. In general now, we're entering a phase where we're upgrading our assessment of markets, and New York, New Jersey is a great example of it. Is it time for rent growth there? No, not quite yet. This is a year where we're going through a transition phase like we've talked about. It's just worth knowing that we have a bias to upgrading here as vacancy rates have peaked, are beginning to come down, tone, and customer demand is positive. Turning to Europe. So first off, the Western European geographies of Germany and the Netherlands are leading that marketplace. We have the dialogue that was described in the prepared remarks. We have it globally, and that includes Europe, and the tone there is positive. Business plans are intact, and customers are moving forward with their real estate requirements.

Maybe one thing I would add on here is just focusing on the unit size or building size. Anything over, call it large format, 500,000 sq ft or above, we're nearly sold out. We're 98% leased across the globe at that size. You'll start seeing rent growth there certainly.

Thank you, Nick. Operator, next question.

Next, we have Vikram Malhotra with Mizuho. Please go ahead.

Morning, congrats on the strong quarter. Just two clarifications. I think last quarter you had said as we enter the back half of the year, we're likely to see some markets where annualized rent growth could maybe eclipse your rent bumps. I'm just wondering if you can give us a bit more color, like which markets are you seeing real rent growth on an annualized basis? If you can just clarify on the same store NOI outlook, the cash outlook, given the number you had in 1Q, it does suggest a decel. What's sort of driving that or I guess what drove the big pop in 1Q versus the guide?

Hey, Vikram. I'll start with market rent growth, and Tim will take some of the same store questions. I like the way you worded the question there, trying to get really specific numbers out of me. I don't recall that we would have put it that way. Let me just tell you, the healthiest geographies include Atlanta, Dallas, Houston, Columbus, also outside the U.S., places in Latin America like São Paulo and Mexico City. These are the leading geographies for rent growth.

Vikram, on the cash piece, yeah, our guidance reflects our expectations clearly. The first quarter is benefiting from some occupancy comps, a bit more favorable on the first quarter. As you think about the cadence of 2025, we built occupancy over the course of that year. Those comps get to be a lesser effect. Then rent change, of course, is powerful rolling through the portfolio. On a year-over-year basis, as spreads get a little bit more relaxed, that contributes lesser to quarter-over-quarter. Well, sorry, year-over-year for the same quarters in terms of same-store.

Thank you, Vikram. Operator, next question.

Next, we have Thomas Catherwood with BTIG. Please go ahead.

Excellent. Thank you, guys. Maybe going back to the data centers for a second. Even when power is secured, it seems like there's a supply chain crunch on the equipment side, which is creating bottlenecks, especially with turnkey developments. Are you able to get ahead of that by pre-ordering material and equipment similar to what you did during the pandemic? And if so, is that giving you an advantage when it comes to your build to suit negotiations?

Thanks, Tom. The short answer is yes, absolutely. Procurement, our fortress of a balance sheet, and ability to get out in front of these long lead items is absolutely a differentiator for us. What I'd say is just overall, this machine we've built and that we focused on so much over the last three years around building these capabilities across this company, whether it be procurement, data center expertise we've built in a big way over the last few years. It's leading to this pipeline that you see and the confidence that we have in putting these numbers out there. I'll actually correct something I said earlier on today in an earlier question around margins. Margins are actually 25%-50%, not 25%-50% better than logistics. These are very profitable deals.

Keeping in mind, our pipeline is built on the foundation of logistics-based buildings and land.

Thank you, Tom. Operator, next question.

Next, we have Caitlin Burrows with Goldman Sachs. Please go ahead.

Hi, everyone. You might have touched on this a bit in the prepared remarks in terms of three points of focus. Tim, you mentioned the new GIC and La Caisse JVs, the acquisition vehicle in Japan, the Agility Fund. It just seems like a lot. I'm wondering if there's some new increased focus on the strategic capital business. Are those coincidental timing, or is there some bigger push kind of on the fund side? Is there any core differences between these new funds and the existing ones?

Yeah, Caitlin. Look, we're really proud and excited of the number of vehicles we've launched now in the last two quarters, five new vehicles spanning geographies and formats, but also risk appetite. One thing that you see between the U.S. Agility funds launched last quarter as well as the GIC venture announced here is spanning into some development activities, and it's very purposeful. We're getting ahead of what we see as growing deployment volumes. On one part in logistics, you see us ramping up our guidance there as markets are improving. This is a machine that ought to be able to do $5 billion-$6 billion pretty easily, I would say, with our land bank and the size of our platform. But that's being matched up with this incredible data center opportunity that Dan's speaking to.

We are looking at the capital needs there and finding the right ways to get to all of those opportunities actually in a smarter, more capital efficient format that can yield fees and promotes. You're seeing that branching out exhibited in the announcement of these vehicles.

Thank you, Caitlin. Operator, next question.

Next, we have Michael Goldsmith with UBS. Please go ahead.

Good afternoon. Thanks a lot for taking my questions. Lease proposal pipelines picked up quite a bit in the first quarter here. Can you provide a little bit more context around it? What's driving it? What sectors it's coming from? What sizes? And how should that translate to actual leasing in the coming quarters?

It's Chris. What's underpinning that is customers have been deferring growth requirements, sitting on their net needs, and they're increasingly responding to the growth in their businesses, the opportunity to invest in their supply chains. As far as slices, it's diverse. There are a couple of different ways we can look at it, whether it's by size. There's growth, say, for example, both above and below 100,000 sq ft unit sizes. There's growth, for example, in terms of organizational type. Say international scale customers versus our local scale customers. Those are both growing, as well as both renewal and new requirements. There is diversity there.

Thank you, Michael. Operator, next question.

Next we have Vince Tibone with Green Street. Please state your question.

Hi, good morning. I wanted to follow up on your comment that data center suppliers are increasingly taking down logistics warehouse space. I just wanted to get your perspective on how material this demand driver could be in the coming years, and also how sustainable. Is it all tied to construction and this could be shorter term leases or is this about servicing existing data centers as well? I'm trying to get a sense of how is this a new structural demand driver for the space? What percentage of new leases maybe it's represented in last quarter or two, if you're able to share? I just wanted to kind of pick your brain on that kind of seemingly new side of warehouse demand.

Yeah, Vince, you're right. It is a new structural driver of logistics real estate demand. It has gone from, say, less than 5% of new leasing a year ago to now 10% of new leasing, and it's an even greater share of the forward-looking pipeline. So there's absolutely upside over the near term as a consequence of this driver. In terms of the breadth and duration, I suppose, number one, we see them signing deals with really healthy term. There is a shift in their own supply chains going from, I think you could think about it as unbundling manufacturing and distribution to having distribution more regionalized and close to the end production of the data centers. There's really solid momentum here, and you're right to describe it as a new structural driver for logistics real estate.

Thank you, Vince. Operator, next question.

Next we have Michael Carroll with RBC Capital Markets. Please go ahead.

Yeah, thanks. With regard to the data center opportunity, how do these tenant discussions progress when deciding between pursuing a power-based or a turnkey build-out? I'm assuming these are different tenants that would want the power-based builds. Is that fair? How much of the opportunity that you kind of quoted in your prepared remarks could potentially be turnkey?

Every discussion, every deal is different, let's put it that way, and different users have different mindsets at different periods of time. What you see from us, we're heavily focused on the powered shell side of this as you start these discussions, and then you've seen us deliver some powered shell plus. Really, we're trying to just work through the customer, what they need from us, and as we talk about how we capitalize this business longer term, maybe you see some more turnkey from us over time. Really, it's just a matter of what customer you're talking to and what's on their mind at the time. Yeah, and yield. What is their respective cost of capital is the other thing I see us coming up against, because the migration up to turnkey can be expensive.

Thank you, Michael. Operator, next question.

Next up we have Nick Thillman with Baird. Please state your question.

Hey, good morning. Tim, I wanted to circle back on some of the commentary you had on the acquisition side and cap rates. Obviously, varying degrees of demand from a fundamental standpoint and a leasing side, and understand your comments on just core portfolio transactions and quality buys. It seems historically, relative to historical trends, just cap rates by market are historically tight. I'm wondering if you guys could provide a little bit more commentary on markets where maybe you're seeing cap rates expand a little bit more, or maybe you're seeing a little bit more compression on the transaction side. Thanks.

Yeah, Nick, I would say cap rates certainly expanded over the last few years. They've been holding pretty steady for the last 5, 6 quarters or so. We obviously dive deep into this. Volumes themselves are actually, I would say, normalized. Those cap rates at a market 5%, it's going to be a range between 5% and 5.5%, depending on the location quality. You're seeing more of a divergence of class B and C, obviously, that collapsed during the last cycle. When we look at it, we are an IRR-based investor. We're not focused necessarily. Of course, we're focused on it, but we're looking at the total return of these assets, quality, total return, location, and so, cap rates can be a bit confusing at times, or misleading.

Thank you, Nick. Operator, next question.

Next we have Michael Mueller with JPMorgan. Please go ahead.

Yeah. Hi. For GIC and La Caisse, can you give some color on how you determine what developments will be done in those ventures versus on your balance sheet?

Hey, Mike. We go through an allocation policy that is longstanding at the company now. As you can imagine, our 40 years as an asset manager, we've had overlapping vehicles with mandates that need to be managed. We have an allocation policy in that regard that deals will cycle through. It could find any of those vehicles, including the balance sheet as being the ultimate developer of some of these assets, and it's dependent on a variety of conditions that are run with good governance. I think that makes your lives difficult if you were left only that, which is a way of saying you're going to be increasingly reliant on the PLD share of these development volumes. That'll cut through all that noise for you, because ultimately, that's the thing that's going to matter economically for the company.

Thank you, Mike. Operator, next question.

Next we have Brendan Lynch with Barclays. Please go ahead.

Great. Thanks for taking the question. It looks like turnover costs per sq ft are coming down. I think it's now about 7.3% of lease value, but free rent has ticked up a bit. How should we think about the evolution of concessions going forward?

Well, I'll start. Concessions are still a bit elevated right now. We've seen free rent, as you highlight, stepped up. I said earlier, so I'll say it again, some of that influenced by the greater amount of roll out of the West, where those conditions are softer and concessions are a bit more elevated. We do expect concessions to normalize as occupancies build, which on the free rent metric would be more on the order of something like 3% of lease value versus the little bit of a bulge that you see at the moment.

Thank you, Brendan. Operator, next question.

Next we have John P. Kim with BMO Capital Markets. Please go ahead.

Thank you. On data centers, I wanted to see if there was an update on the timing of your data center vehicle. Also if you can just clarify the 5.6 GW of capacity, is that on gross or leasable power?

Sure. Let me start with the capitalization piece, maybe hand it to Kim or to Tim for some color. Bottom line is we've had very constructive conversations with global investors over the last 2.5 quarters or so, and interest remains very strong. We feel like we're in a very good position with multiple options, and we're just taking the time to evaluate what makes the most sense for us right now. Our current model of building on the balance sheet, and then selling these stabilized assets has worked really well the last couple years, and we see it working quite well going forward. I like to actually step back at this point and realize what we've done over the last few years, and I already mentioned it at the front end of the call.

The pipeline we've built, the capabilities we've built, and the progress we've made since we embarked on this officially at, call it, Investor Day 2023, has been tremendous. Feel great about what we're putting in front of these investors and where we're going to take it from here. Tim may have some additional color on the capitalization piece.

Look, I think you covered it well. Happy to take other questions. I think the second part of your question dealt with clarification on the megawatts. That is a utility load that we're reporting out, and there's going to be probably two-thirds of that will be critical, so you can apply math based on those numbers.

Thank you, John. Operator, next question.

Next we have Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Hi, thanks. I just wanted to go back to the discussion on market rent growth and appreciate some of the color, and good to see the first increase in I think two and a half years, you said. Do you expect market rent growth to persist just given where conditions are at this point in the cycle? I know you touched on SoCal, but can you share a little bit more detail on that market, and a bit of a real-time read on what you're seeing and how conditions are currently, and how the market's performing relative to expectations so far this year?

Yeah. Hey, it's Chris. I'll start, and Dan may have some remarks as well. First off on market rent growth, I want to underline the word stability. We did have a bit of growth in the first quarter. It was pretty incremental. That is really a market-by-market exercise, with most markets enjoying stable to slightly rising, with there being pockets of real strength like we discussed earlier on the call, as well as some pockets of softness like we also discussed. I think what you should think about is our call is unchanged, and we're passing through an inflection. Rent growth is still a little bit uneven, and it's just a bit too early for broad-based and sustained growth. I'll offer a few details on Southern California. That is a market that is moving through the bottoming process. We're seeing demand pick up.

Vacancy is near a trough, but it's just a bit too early for rents to increase on a broad base. There are pockets that are firming.

Yeah, let me just pile on a little bit here on Southern California. I feel like I've said this quite a bit over the last year and a half or so in various meetings. I think it's really important to emphasize just how big of a market Southern California is and what our MO is in these markets. We're focused on being close to the end consumer. There are 24 million consumers in Southern California. It's a $2 trillion economy down there, and it's just getting more and more difficult to build down there. The supply backdrop is really shaping up for that market quite well. We feel good about the projection we've made about Southern California kind of tailing the overall market by 2-3 quarters.

That was the last question. Thank you all for joining the call. Just a big thank you to our colleagues around the world for another exceptional quarter. We look forward to seeing you all at upcoming conferences and speaking again at the next quarterly call. Thank you.

Thank you. With that, we conclude today's conference call. All parties may disconnect. Thank you.