Baron Fund Makes Prologis Its Second-Largest Holding

Prologis was the second-largest holding in Baron Real Estate Income Fund at June 30, making up 7.7% of its assets. In its second-quarter letter, Baron said it remained positive on the warehouse owner, citing expected demand, limited supply and room for rents to rise.

Baron estimates rents on Prologis properties are generally about 20% below current market levels. That gap offers a possible source of growth as leases renew, though the pace depends on market rents and when contracts roll over.

Prologis’ own latest results showed strong leasing. The company signed more than 67 million square feet of leases in the second quarter, a record, and its owned and managed portfolio was 95.5% occupied at quarter-end.

On leases started during the quarter, Prologis reported a 22.3% increase in cash rents and a 36.9% increase on a net-effective basis compared with previous rents for the same space. The figures reflect signed leases, not an immediate increase across the entire portfolio.

The company raised its 2026 Core funds from operations forecast for the second time this year. It now expects $6.22 to $6.30 per share, a measure investors use to assess REIT operating performance.

A second growth angle is data centers. Prologis said its power pipeline reached 5.8 gigawatts in the second quarter, including 1.6 gigawatts secured and 4.2 gigawatts in advanced stages. That creates potential, but the pipeline is not the same as operating capacity or completed projects.

The balance sheet offers some protection against the large borrowing needs of property development. At June 30, Prologis reported debt equal to 4.7 times adjusted EBITDA, a 3.3% average interest rate and 7.9 years of average debt maturity. Still, borrowing costs and property values remain important risks for real estate investors.

Baron’s endorsement is one fund manager’s view, not a guarantee of returns. Investors weighing the shares can watch whether lease demand and rent gains hold up, and whether Prologis turns its data-center pipeline into completed developments and income.