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Greetings, and welcome to the Prologis First Quarter 2025 Earnings Conference Call. [Operator Instructions]. And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you, Justin Meng, Senior Vice President and Head of Investor Relations. Thank you, Justin. You may begin.

Thanks, John, and good morning, everyone. Welcome to our first 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 statement or 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. Additionally, our first 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 a reconciliation to those measures. I'd like to welcome Tim Arndt, our CFO, who will cover results, real-time market conditions and guidance. Hamid Moghadam, our CEO, and Dan Letter, President; and Chris Caton, Managing Director, are also with us today. With that, I'll hand the call over to Tim.

Thanks, Justin. Good morning to everybody, and thank you for joining the call. Prologis delivered a very strong quarter. We leased 58 million square feet, a near-record broke ground on several build-to-suit developments with key customers and expanded our power capacity by 400 megawatts to support growing demand for data centers, a 13% increase. We outperformed our expectations on earnings, occupancy and -- prior to April 2, industrial fundamentals were improving and had it not been for the recent uncertainty from global tariffs and their downstream impacts, we would have raised our expectations for 2025. Instead, we are electing to maintain earnings guidance as there are no policy conclusions right now to plan differently and our severe stress test to core FFO supports the existing range. While the instability created in the last 2 weeks may disrupt logistics and supply chains, it will certainly slow decision-making. Many companies now question where to source are or even sell their goods. In speaking with customers, they echo the sentiment, while at the same time revealing a need for flexible inventory positioning in the evolving landscape. Let's be clear, the range of outcomes is wide. We see potential for a recession -- or possibly both. And let's also not dismiss the potential for a quick resolution. It's important to remember that Prologis was designed to weather any environment. We have a global footprint with a highly diversified rent roll. Our revenues are contractual with fixed or inflation-linked escalations. Fortress balance sheet has unrivaled access to global capital and we are trusted partner to many of the largest institutional investors in our strategic capital business. All of this positioning Prologis to be a partner of choice for our customers, especially in turbulent times. Before I review the quarter, let me share 3 high-level thoughts. First, a disconnected world will require more warehouse space, not less. Second, the current environment is an endorsement of our long-standing strategy to invest in markets where goods are consumed, not where they're produced. And third, we built our company with intention to not only withstand market disruptions, but to take advantage of opportunities as they arise. Turning to the quarter. Core FFO, including net promotes was $1.42 per share, and excluding net promotes was $1.43 per share, each ahead of our forecast. Occupancy ended the quarter at 95.2%, down 70 basis points from year-end, which was better than expected due principally to strong retention. Net effective rent change during the quarter was 54% and on a cash basis was 32%. As a result, net effective and cash same-store growth during the quarter were 5.9% and 6.2%, respectively. Our net effective lease mark-to-market ended the quarter at 25% and with most of the sequential decline driven by the increase of in-place rents. This 25% represents a further $1.1 billion of incremental NOI after capturing another $105 million during the quarter. On capital deployment, we started approximately $650 million in new developments, outperforming our forecast with nearly 80% of the activity and build-to-suits with lease terms that average 16 years. We have been describing the build-to-suit pipeline is robust for some time and in the last several months, decision-making finally thought which we believe highlights the need for space is real, but what has kept volumes low is confidence. We have over a dozen deals still in active dialogue today and in fact, have signed an additional 2 transactions for 1.1 million square feet post April 2. The pace so far this year has been well ahead of normal. In our data center business, 400 megawatts of power has moved to our advanced stage category upon agreement with utilities for projects in a Tier 1 market. We now total 2 gigawatts in this category alongside our 1.4 gigawatts of power, which is already fully secured. Our conversations with utilities and hyperscalers alike have been very productive, and we will have start activity to report for the second quarter. And finally, at quarter end, we have over 900 megawatts of solar and storage capacity either in operation or under development advancing us closer to our 1 gigawatt goal for the year with the U.S. and global -- both and great need for additional energy production and solar as the least expensive format, we feel great about the long-term prospects of this growing business. On the balance sheet, we raised approximately $400 million in new capital for our flagship open-ended funds yet had similar amount of redemptions, leaving the capital raise near neutral in total. Relatively light quarter debt issuance with $550 million raised at a weighted average rate of 4.1% and including the Canadian bond transaction further insulating that currency exposure. Our balance sheet remains in great shape as evidenced by the upgrade we received from Moody's this quarter to an A2 rating. Prologis now being one of only 2 public REITs with an A-flat rating from both agencies. Turning to the operating environment, which I'll cover by describing conditions before and after April 2. The postelection uptick in leasing held steady throughout the quarter with improving proposal volumes and conversions. We saw increased touch points with our global customers and higher activity levels specifically within transport, food and beverage, consumer products and electronics. Week by week, we were on the lookout for any slowdown in the level of interest or pace of leasing following the strong fourth quarter. And while it did not invest in our pipeline numbers, as early tariff threats came on and off and uncertainty grew mid-quarter, we did speculate that we see a slowdown in decision-making. With all of that being old, let's turn to an update on the last 2 weeks. While it's ultimately announced on April 2, clearly went beyond our early predictions, making the environment less certain. Even with the pause in some tariffs or a resolution of others, Customers simply lack a steady backdrop upon which to plan their businesses. We've now dialogued with more than 300 customers, including 2 -- prompt customer advisory boards representing over 20% of our rent roll. This is what we've heard. Our customer moving quickly to manage tariff volatility with many accelerating shipments where possible. They're also rerouting volumes and have urgent demand for overflow space. Accordingly, they are looking for short-term flexibility and 3PLs are typically where they turn. Indeed, 3PL's flex space is getting more utilized with 1 prominent name describing that they've increased their utilization from 83% to over 90%. We Additionally, alternatives such as free trade zones and bonded warehouses are being evaluated. Our customers who are focused on food and beverage, industrial manufacturing and essential consumer products like health and household goods are more insulated and are operating with confidence but of course, customer selling goods with China-based production faced the most uncertainty. Price increases to consumers will be passed through where they can, but margins will still come under pressure Therefore, planning horizons are shortening and flexibility remains key. And customers like everybody are concerned about a recession where consumption and demand will be negatively affected further shaping their response. The diversity of feedback was a good reminder that many of our customers source domestically and are relatively unaffected while others have the capability to adapt or even stand to benefit. Whatever the scenario, our team is moving decisively to partner with our customers and meet their needs. In the last 2 weeks alone, we've signed approximately 80 leases for more than 6 million square feet. That's a roughly 20% dip from our usual pace, and we expect things may slow further, but it does reflect a market that's still active. Looking ahead, here are some things we expect. Inventory levels will increase as businesses stockpile and build resiliency. E-commerce is likely to take more share in an environment where product availability becomes an important factor to consumers in choosing how to shop. Global markets will become more important with Canada, India and Brazil, among those in our portfolio that we expect to benefit. Mexico will be another, and it has stood out in terms of a growing level of interest pre and post April 2. Port markets may benefit from an immediate buildup of inventories. From there, we will need time to know how or if trade flows ultimately adjust. Nevertheless, we still believe in the long-term outlook for such markets with large population centers and significant supply constraints, a topic we'll be sharing further research on in the coming days. Finally, we believe that the inflationary effects of tariffs will only serve to increase the value of hard assets, replacement costs and rents. Turning to our guidance. As mentioned, our first quarter results and outlook would have called for a tightening and increase of guidance, including earnings. Given the circumstances, however, we've opted to hold most areas unchanged with the main exception in capital deployment. We are reducing our development start guidance at our share to $1.5 billion to $2 billion, which reflects a reduction in our expectations for spec development until visibility improves. Our combined contribution and disposition guidance is also decreasing to a range of $400 million to $1 billion, again, reflecting uncertainty in both the capital markets and the fundraising environment. In turn, we are reducing our development gain guidance to a range of $100 million to $250 million. We're also increasing our G&A guidance to a new range of $450 million to $470 million, in part due to the impact on capitalization from the lower development activity. Outside of this, all other areas of our prior guidance are unchanged, with core FFO, including Net Promoter to still range between $5.65 and $5.81 per share and core FFO, excluding the promote expense to range between $5.70 and $5.86 per share. As I mentioned, we look carefully at our guidance and a severe stress test by examining the fallout from past crises including the [ bamera ], the GFC [ Brexit ] and the early days of COVID. GFC had the most extreme outcomes in terms of occupancy loss, rent declines and defaults, which we mirrored and made worse by layering on additional levels of bad debt. In this scenario, we see an earnings outcome that lands at the bottom of but within our range. Anything can happen, and we will reassess in the second quarter, but we feel good about the residency it reflects. In closing, we run the company in a disciplined way with the simple tenant to stay close to customers and invest capital accretively. So times like this do not call for dramatic shifts to our strategy. We will be attentive to our customers, and we will use our balance sheet wisely. We will leverage our strengths in securing build-to-suits in both logistics and data centers. We will continue to harvest all that the platform provides in the way of profitable, adjacent businesses that support our customers and above all, will empower and rely on our people whose expertise and dedication are the foundation of our success. With that, I will turn the call over to the operator for your questions.

[Operator Instructions]. And the first question comes from the line of Tom Catherwood with BTIG.

Good afternoon, everybody. Tim, I appreciated your commentary on interactions with customers over the past 2 weeks, and appreciate how much is changing on a day-to-day basis. But the other sub to the industrial equation isn't just customers and their supply chains, it's demand, which is ultimately driven by consumption. Are there lessons from prior just from -- you obviously mentioned the dot-com GFC but also from kind of the first round of tariffs during the first Trump administration that can serve as a guide for the current environment, maybe in form a, what you're looking for to kind of judge consumption and demand? And also, what are the risks to consumers going forward?

Well, let me take a stab with that. Hamid here. Clearly, if we get into a recession environment, consumption will take a hit. But I don't think you're looking to our call for predictions about whether we're going to have a recession or not, they're better sources you can go for that. But certainly, our business and any other business in a recessionary environment will suffer. You handicap that probability. We're not really qualified to do that. But with respect to the relationship between consumption and GDP growth, that relationship has remained constant for decades now. It's about 70% in the U.S., and it's lower than that in other emerging countries and coming up, increasing. So I'm pretty confident that the consumption in the long term will trend up. And during a recession, it will take a hit. Now as to the 2017 tariffs, I think we've shared this with you before. Can't tell you what happened to consumption. Basically, nothing happened to consumption. That I can tell you. I don't remember the exact numbers. But what I can tell you is that since that date, U.S. production of things that are consumed in the U.S. went up 2% in real terms. What was made in China went up by 2%. Overall, consumption went up in the 20s in the mid-20s. So where did that increase come from? It came from China plus 1 and Mexico and to a lesser extent, Europe. So certainly, we've seen some of these trends change the picture and the origins of manufactured goods. But again, as we've said many, many times, where they're consumed is what we care about, and they didn't really do anything where they're consumed or how much they're consumed.

And the next question comes from the line of Steve Sakwa with Evercore ISI.

I guess, Tim, just wanted to maybe focus a little bit on the leasing, the commencements and then I know that you had talked about occupancy dropping kind of in the early part of the year and then rebuilding in the back half of the year. But the occupancy drop at least versus our estimates, was a bit wider than what we were looking for. I know you don't provide a quarterly lease expiration schedule you kind of just provide the annual. But maybe just help us bridge the gap on the kind of spot occupancy decline in the quarter? And then maybe how do you think about occupancy cadence over the course of the rest of this year versus maybe where you were a couple of months ago?

Thanks, Steve. Yes. So look, the other side of the equation that you need to consider in looking at an occupancy drop in any time period as what are the -- what's the role that's coming up. So we had a disproportionate amount of leases rolling in the first quarter. So while I would describe our retention is pretty good at 73%. Just a lot rolling there, and that caused the drop. I'd characterize the drop is not dissimilar from history and very much in line with our expectations. As for the second part of your question, in the stress test that we looked at or let me go back a quarter, our prior guidance, imagine that we were going to lose some occupancy over the course of the year and build back up by the end of the year. One of the main changes in the stress test is that we are going to lose that occupancy as planned and even more, and it's going to basically stay at that level until the end of the year, and that's reflected when we looked at the stressed scenario.

And the next question comes from the line of Ronald Kamdem with Morgan Stanley.

Just going back to sort of the stress test and thinking about sort of the specific tenant groups, particularly 3PLs and sort of their impact in the Inland Empire West. Just sort of curious, just real time, how you guys are thinking about that group and what sort of the assumptions that are being baked in.

It's Chris. I'll jump in. So what I think you're talking about and is worth covering here is simply this category of Asian 3PLs. This is a category that faces new risks. But to keep it in perspective, the U.S. business of these Asian 3PLs are just a little over 1.5% of our rent. Now policy is still evolving, and let's not speculate here. But as you come to your own views, a few things keep in mind. One, these customers are growing in response to just general e-commerce growth as well as state side inventory fulfillment models. These companies have found a product market fit and product will need to flow. These companies have also taken steps to mitigate risk. They're pulling forward inventories. They are diversifying their sources, their production sources and they're also growing their domestic customer footprint. Ultimately, their performance is going to be subject to how policies evolve from here, and we will keep you informed as the situation changes.

Yes. The other thing I would add to that is that if you just try this on your own go on some of the big e-commerce sites and try to buy some phone charges for your iPhone or iPad or pretty much anything of that ilk. And you'll see that it's sold out and don't know when we're going to get some more. So the demand is clearly there. But the challenge is getting the inventory in to fulfill that demand. So I think the underlying band is pretty good.

And the next question comes from the line of Michael Goldsmith with UBS.

I guess, there's been recent news about Amazon being back in the market. Can you talk a little bit about what that means for overall demand, how that can impact the overall industry? And if how that has influenced pricing power in the past and that can have an impact this time?

Thanks, Michael. This is Dan. We have definitely seen Amazon in the market. As a matter of fact, we've signed some pretty good deals with them this year. And we're seeing the overall e-commerce segment of our customer base. very strong right now back to high teens, 20% of our overall leasing. So really pleased with what we're seeing from them.

The next question comes from the line of Craig Mailman of Citi.

It's Jason here with Craig. In the opening remarks, you talked about the company looking to take advantage of opportunities. I was hoping you could discuss that in more detail will be the opportunities you're starting to see emerge or kind of trying to keep eye on where you would look to lean into, if possible?

Too soon to -- for anybody thinking about putting something in the market or selling something, certainly the last 2 weeks have not been the time to execute that strategy. So I think these things will take a while to play out. And depends on how bad things get. There are 2 things going on. One, there's pressure on rents, obviously. And second, I don't know where the 10 year is going to go, and cap rates are kind of correlated with that. So I think most people in this environment are going to wait and see for some clarity. But depending on how bad this thing gets, it could be 6 months, maybe 9 months before you start seeing some opportunities. And let's not speculate about how bad it's going to get or whether this is going to be a blip. I don't know. I mean it changes every day.

The next question comes from the line of Caitlin Burrows with Goldman Sachs.

Maybe just on lease gestation. I know it was above average in 4Q and then it was up again in 1Q, which makes sense. But can you go through some more of what you're hearing from customers and potential customers with respect to kind of who is making decisions today? What's driving them versus who's dragging out that decision-making time line? And what could make them ultimately make a decision and then the group that might just say for now, we're standing on the sidelines?

It's Chris. I'll take a stab at that. So first, you're reading the statistics correctly, gestation was elevated in the quarter. So that's really happened stance and mix in the first quarter. So there's going to be some seasonality as it relates to December and November deals that just take a bit longer with the holidays. And also the trend we discussed as it relates to preelection opportunities landing that continued into January, lifting the number. We think it will continue to remain elevated. There is a range of customers that are talking to us that have growth requirements. They have it need for space and they just need a clear economic backdrop, tariff backdrop to make decisions. But there are a handful of customers making decisions. Some are responding to supply chain volatility and bringing in goods urgently for their own tactics.

Yes. I think you see that in the 3PL utilization rates because that's the first place you're going to go. And remember, a lot of these people have been in delaying decision mode for a number of years. And if their underlying businesses are solid, they can't do that anymore. Perhaps the most surprising thing that I've seen is that even in the last 2 weeks, we signed a lot of leases and we've signed build-to-suits. And these customers could have just said, okay, let's punt on those until we have clarity. So I'm actually very encouraged. And you can't take 2 weeks and extrapolate too much, but actually in those 2 weeks, the number of build-to-suits that we have signed are significantly larger in terms of square footage and rent than what we normally signed for a 2-week period going back a couple of years comparing. But it's 2 weeks, so who knows. But there are definitely people out there making decisions. And I wouldn't be surprised if the vast majority are going to try to delay it as much as possible. But water is building behind the dam. It's going to break at some point.

And the next question comes from the line of Vikram Malhotra with Mizuho.

I just wanted to clarify kind of the stress test scenarios. Maybe if you can give us a little more color. You talked about where you thought the occupancy was in the down case. Do you mind just giving us a sense of like where did rent -- market rent shake out for the quarter, where there's sort of net absorption in your market to take out for the quarter? And then if you take those other components, where are they in the stress test in terms of low end and high end?

Okay. I'll take on the stress test description, and Chris can hit some of what happened during the quarter. Basically, in the GFC, what we had seen in the first 12-month period at least, was market occupancy decline of 170 basis points. We took that in added it to our -- the decline that we had already. And as I mentioned earlier, just had it sustained through the end of the year. We had seen market rents drop 18%. We brought that into the forecast had it affected immediately instead of playing out over some months, just took it upfront. And then the last piece is bad debt. Our experience in the GFC was bad debt of 56 basis points. We actually have integrated a higher level there by picking up parts of our portfolio have something that's closer to 75 basis points on an annualized run rate. So we think we hit it pretty hard.

So on conditions in the quarter, we saw an absorption 21 million square feet. We saw global decline 1.5%. Almost all of that, by the way, was Southern California globally, excluding Southern California rents only dipped about 50 basis points with many markets flat or rising.

Yes. And the thing I want to make sure everybody understands here. We are not setting up a new range. This is not a prediction. We just wanted to know what's the worst thing that can happen. Of course, the worst thing that can happen is nuclear war and this is all academic. But going back and looking at the last 4 or 5 major downturns and taking the worst on every parameter on every independent variable, combining it together and then adding some basically still gets us to the bottom of the range. But please, this is not a prediction. We are incapable of making a prediction in this environment. And there is no data and we have more of it than anybody can power us to confidently predict anything for you. So we just wanted to know how bad it could get.

And the next question comes from the line of Ki Bin Kim with Truist Securities.

Do you have a lens of what the level of import tariffs, your average customer could possibly bear? I know there's a wide range of customers, but this high-level question. And I'm not sure if the 10% tariff is a win for your customers? Or does it have to be at 5%, just any kind of thoughts you can share?

Yes. Again, this is pure speculation because we haven't had any discussions or these kinds of tariffs. I think since the turn century. But my sense is that given the way this policy was rolled out, I think people were prepared for something around 10%. But on April 2, basically, I would say if you pull our average customer, they would have said, "Hey, we don't know, MB, it's going to be a lot higher." And then with the pause, I think they feel somewhat a sense of relief. I think that the economy can absorb a 10% tariff. But it will change how these inventories are routed. To some extent and where they come from. I think net-net, if you go beyond sort of what happens next month or next quarter, I think if I were going to predict anything, I would say Mexico would be a big beneficiary of all this, so with Brazil, and we would probably have a coming from China for sure. And the country is surrounding around China in Asia would have a higher here. And Europe, I think is going to probably tread water or maybe decline a bit because there's still -- in Germany, the big exporter is very focused on internal combustion cars. And I think those are going to come under pressure. So that's what I think is going to happen. But who knows?

The next question comes from the line of Vince Tibone with Green Street.

I wanted to follow up on the comment that disconnected world requires more warehouse space. Could you just elaborate on that remark and how you arrived at that conclusion?

Yes, Vince, let me tell you a story. I was in Brazil when Brexit was announced. By the time I got on the plane and landed in San Francisco, the market had discounted the value of our U.K. portfolio by more than its entire value, okay? And I was bombarded by questions of what's going to happen and what do you think is going to happen to your U.K. business. So the RD -- written off more than 100% of the value of our U.K. business and the stock during that 10-hour flight. What did happen? For the ensuing 3 or 4 years, the need for inventory increased both in the U.K. and in the continent because those supply chains that were optimized across Europe had to be rebuilt for the continent and for the U.K. separately. And that required net more space. So that's what happens when you go through these transitions, and by the way, throughout that period, occupancy remained at 99% in the U.K. So these things don't play out the way some of the newspaper articles talk about. And we believe that duplication of what is a highly engineered supply chain during times of uncertainty will lead to more inventory, and therefore, more space to put it.

And the next question comes from the line of Blaine Heck with Wells Fargo.

Can you talk a little bit more about any change you might be seeing in demand from your fund investors, how they're thinking about their allocation to the industrial sector overall and current pricing and I guess, whether you'd expect to see increasing redemption requests in the funds in the coming quarters?

The answer is, we were seeing a really strong, positive and leading up to April 2 and lesser discussions and lots of interest and inquiries and reversing rates and all that, more than any time, I would say, since 2022. After April 2, I think people are waiting to see what the denominator effect is going to be. I mean it's not a real estate question. Real estate as a percentage of allocation of the overall portfolio. And the stock market is down, I don't know, teens. So by definition, even with increasing real estate allocations, it could be that the absolute dollars available for real estate are going to go down. Also, a lot of institutions have committed maybe over admitted to some private asset classes, venture, private equity, et cetera, et cetera. And the liquidity coming out of those coming back from those is certainly going to be curtailed. I mean there are fewer IPOs that are going to happen this uncertain environment and liquidity events are pure and further between. So I think it's the denominator effect that will affect -- that will determine how much money will come out. Not so much interest in industrial real estate, which was really good and getting better.

The next question comes from the line of Mike Mueller with JPMorgan.

How do you see UPS downsizing the Amazon exposures impacting your next couple of years?

Mike, could you repeat that, please?

Yes. So sorry about this. How do you see UPS downsizing of its Amazon exposure impacting you over the next couple of years?

Our business with UPS has continued, and we've done actually some pretty significant leases with them lately. So I don't know. That's not something that's come up in our discussions.

And the next question comes from the line of Samir Khanal with Bank of America.

Just looking at the smaller spaces below 100,000 square feet, that 92% occupancy seems a bit lower versus the other sizes. I guess that was a bit surprising. Can you maybe provide color on that and maybe markets that are seeing that space seeing more challenges than others? Just trying to understand usually that type of space, I thought it is a bit less supply and would have been faring a little bit better. Just want a bit more color.

Thanks, Samir. That 100,000 square foot and less customer base is typically actually the lowest occupancy you see if you look quarter-over-quarter in our supplemental. There's nothing unusual this quarter or last quarter that would suggest there's any issue there. as it relates to markets where there may be issues.

Yes, I'll jump in. So the strongest markets, first off, are global. Being international is great in this environment, whether it's Europe, whether it's Latin America, whether it's Japan. As it relates to the American markets, we've seen a broadening of strength across categories. So the Southeast has been and the Sunbelt has been resilient, whether it's Seattle, Nashville, Houston and increasingly, Dallas. And we're also seeing an inflection and improvement in the Midwest. So pick a market like Indianapolis. That's one that's really moved a lot in the last year.

Yes. One more thing, Samir, is the smaller spaces actually have shorter lease terms. So that's where you see a lot more churn. And certainly, if you look at that customer base, it's going to be the smaller businesses that may have more of an impact. So we're paying very close attention to it, but we're just not seeing anything today.

Yes. And they have lower credit by and large. They're small customers with lower credit. So in if you believe in a recession scenario, that sector is going to get hit more. But you said something that's really important. I do agree that replacement costs for that product is significantly higher than values today. So there is some protection on the supply of smaller spaces. They're very expensive to build. And while I'm on that topic, let me answer a question that hasn't come up, which is that in this environment, and its inflationary effect, we are seeing replacement costs go up significantly. And with the 10-year backing up, the yield requirements on development has gone up significantly. So the combination of those 2 means that the replacement cost rents that will justify new construction are now much higher than they were a month ago. And I think that bodes well for the long-term supply picture here, less supply. Thank you, Samir.

The next question comes from the line of Brendan Lynch with Barclays.

The 6.2% cash same-store NOI in the first quarter was quite strong compared to your annual guidance for 4.5%. Can you just walk us through what your expectations are for the cadence throughout the rest of the year?

Well, it's going to be influenced mostly by occupancy from here. That's a stat that's pretty volatile to the quarter. year-over-year, I'll say, differences in free rent for leases that are commencing within the quarter. So it can be volatile for that -- net effect of both are going to be largely a function from here of the year-over-year occupancy changes, which we've already made clear, we think, in our base case, that was going to march down and in our stress case, still the case and a little more so.

Yes. The main driver of that is the mark-to-market. Basically it's not, at this point, a change in near-term increases in -- rent and occupancies are tough to predict, but a program of bet are probably going to come down a little bit if this thing continues.

The next question comes from the line of Michael Carroll with RBC.

I had a more basic leasing question. So how long does it typically take from an industrial lease to be signed versus when it actually commences. So if activity was pretty healthy in the first quarter and slowed down 20% in April, and I understand it's only 2 weeks so far. When could that actually start to impact lease amendments in your overall occupancy? I mean, are we talking about this being a 2Q type issue? Or is it more like a 3Q type issue?

I'll give you a couple of facts here and others may jump in. This is Chris. So renewals can be signed well in advance anywhere from 3 months to 12 months, depending on the size of the lease. And then new lease commencements can be really rapid. We've had a handful of customers want to move in, in a couple of weeks. Up to order of magnitude maybe 45 days. So it really depends on the mix in terms of new versus renewal and also the size.

Yes, new buildings, it takes longer because they've got to build it out.

And the next question comes from the line of John Kim with BMO Capital Markets.

Going back about a month ago, Hamid, you discussed in the Bloomberg interview that the change in tone has slowed in the past couple of weeks prior to the interview, not really reflected in the data, but that has happened. So I guess my question is, if the tariff uncertainty is resolved, will demand completely recover to where it was earlier this year? Or were there other reasons tenants were acting more cautious pre-April 2?

No other reason that I can think of. And by the way, if I knew the answer to your second question, I would ask you, where do you think the market is going to end up at the end of the year? I don't know. I mean short term, it's very hard to predict these things. That's why I don't even try. But long term is what we're folks focused in the ramp here and the path to that long term can take many different directions.

And the next question comes from the line of Nicholas Yulico with Scotiabank.

I wanted to go back to the -- some of the net absorption data you talked about. I think, Chris, you said in the first quarter, it was $21 million. A year ago, it was in the -- was $27 million, and you guys were saying that wasn't a great number, and you ended up reducing a net absorption forecast for the year. So just trying to understand is, is it right to look at that number year-over-year because based on that, it feels like this first quarter for the overall market wasn't as good as it was a year ago, and I'm not sure what we should be reading into that versus PLD having what you thought was sort of a better leasing quarter overall, but maybe the market is not also reflecting that?

I think you answered the question for me. I completely agree with the way you position that, which is, yes, the first quarter is seasonal. It's a seasonally light quarter. So the $21 million annualizes to around $105 million, $110 million there can absolutely be variability in the numbers, as I think you postulated in your question. I think more important to us is the conversation we're having with our customers and their growth requirements and their growth outlook. So that's how we made our assessment.

Yes. Last year, we didn't have an election. So a lot of the decisions on leasing that would have turned into actual leasing and occupancy in the first quarter would have been made in the fourth quarter, which was still and unknown from an election point of view. So there was a big uncertainty that didn't exist in the prior year. We used to have a role in here that absorption in -- throughout the year was 1, 2, 3, 4. Now I don't -- it's leveled out a little bit from that. It's not quite that extreme. But actually, the normal seasonal pattern is that absorption and occupancy and leasing of space increases throughout the year.

Let me add one more point here. Actually, something Prologis can control. We had about 12% of our rent roll rolling this year. We actually have put 7% of that in the bank already. So we're about 60 our way through that with only 5% of that left to go. So we're in pretty good shape at this point here.

And the next question comes from the line of Steve Sakwa with Evercore ISI. This is the final question.

Tim, just to go back, I just want to make sure I understand that there's kind of the base case and there's your kind of work case scenario. But in your base case, and you mentioned that in the last couple of weeks, leasing volumes were down 20%. I guess I'm just trying to figure out what -- I guess, what level of leasing activity are you assuming in sort of your base case or guidance in terms of either reduction or increases in leasing kind of from here through the end of the year?

Look, I described It's hard to a number on that because ultimately, we reflected in the occupancy drop that we think is going to be more severe and stay low, as I mentioned. That's a mix of both lower retention as well as a slower pace of new leasing. And the way we tested all that was put it through some ranges. So it's just one of those things that is unknowable, but I think the end result, which ultimately drives occupancy, same-store earnings, we've got covered in the stress test.

So that was the last question. So to close out, I just want to make a couple of remarks around the fact that no doubt we're in a very fluid environment right now. The good news is we are built for this. And I really want to thank our teams out there for their execution and focus. Thanks for joining the call, and we'll speak to you next quarter.