Prologis Will Be Impacted by the Current Macroeconomic Environment; Reducing FVE to $118

No-moat-rated Prologis reported decent third-quarter results with the firm reporting funds from operations, or FFO, of $1.73 per share, beating the FactSet consensus estimate of $1.66 per share. The company continues to benefit from the historically low vacancy rate environment in industrial real estate. The market for industrial real estate continues to be strong, but we are seeing some signs of moderation. We believe that weaker macroeconomic conditions, slower adoption of e-commerce, and a strong supply pipeline will result in the normalization of occupancy levels and market rent growth from the currently elevated levels in the upcoming years. We are reducing our fair value estimate for Prologis to $118 per share from $128 after moderating our medium-term rent growth, assets under management growth, and development-related value creation expectations.