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Text: The supplemental document is available on our website at prologis.com under Investor Relations.
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.
And Tom, will you please begin?
Positive momentum in the fourth quarter has carried into 2021 as evidenced by our operating results, profitable deployment activities and strong outlook.
Demand driven by the powerful economic recovery, retail revolution and higher inventory levels is unfolding more strongly than we expected.
Headlines in the past 90 days have been a testament to the value of resilient supply chains.
Those who were prepared are now growing and taking market share.
There is great momentum moving through the supply chain that is signaled by retail sales, import volumes and rising inventory levels.
This will continue as inventory to sales ratios have just begun to rise as companies race to keep pace with demand.
Starting with our proprietary metrics with our view of the market, space utilization is 84.5%, up 100 basis points from the last 90 days.
Our customers tell us their activity levels are rising at the fastest pace since 2019.
Lease proposals reached 93 million square feet in the first quarter, a new high watermark and are up 30%[Phonetic] from 2020 adjusted for the size of our portfolio.
Lease signings were 60 million square feet, our second highest quarter on record.
Much of this activity is in new leasing, and as a result, retention was 69% for the quarter as we're optimizing the credit and rents.
Given our high volume of lease signings, our portfolio -- operating portfolio was 96.4% leased at quarter end.
Our leasing mix continues to broaden with strong demand continuing from space sizes above 100,000 square feet and small spaces demand is improving.
E-commerce demand remains elevated, representing 25% of new lease signings in the first quarter.
The balance of leasing is diverse, with outsized growth among companies that provide food and consumer products as well as renewed momentum in the construction segment as housing expands.
In the U.S., we now expect net absorption of 300 million square feet in 2021, which would be the highest in history.
This strong demand is being masked by supply, and we expect 300 million square feet of deliveries this year.
However, supply remains broadly disciplined.
Years of historic low vacancy rates have constrained demand due to the lack of available properties, particularly in the most desirable markets.
Many of our markets faced shortages of land logistics uses.
In addition, obsolescence and conversions to higher and better use have added to this broad-based scarcity.
Vacancies are below 2% in many of our top markets such as Southern California, Toronto, Germany's main markets and Tokyo.
Our supply watchlist continues to include just four markets.
Houston, Madrid, Poland and West China, which taken together account for just over 5% of our NOI.
More recently, we've begun to see a rapid acceleration in replacement costs.
In the U.S., we expect replacement cost to increase 20% to 25% over the two-year period through 2021, the fastest rate ever.
Our procurement team is proactively mitigating these increases by securing favorable pricing and delivery schedules.
For example, the team has procured steel for 5.2 million square feet of starts at pricing roughly 5% below market and providing us with the 10-week to 20-week schedule advantage.
Strengthening demand and ultra-low vacancies are leading customers to increasingly compete for space, which is translating into pricing power.
Rent growth for the quarter, which was up 2.4% in the U.S., outperformed our expectations.
We are raising our 2021 rent forecast to 6.5% in the U.S. and 6% globally.
Our in-place to market rent spread now stands at 13.6%, up 80 basis points sequentially.
This represents future annual incremental organic NOI growth potential of more than $600 million.
Turning to valuations, logistics assets values are up a record 7.5% over the last two quarters.
A way to capital has emerged coming both from rising real estate allocations and investor strategically reassessing their property focus type.
Applying the valuation uplift to our $148 billion owned and managed portfolio, we estimate that the value of our real estate rose by more than $10 billion over the past two quarters.
The work we've done to position the portfolio and optimize the balance sheet is continuing to deliver excellent financial results.
For the quarter, core FFO was $0.97 per share, which includes net promote expense of $0.01.
Net effective rent change on rollover was 27%, led by the U.S. at 32%.
We are prioritizing rents over occupancy in substantially all of our markets.
Occupancy at quarter end was 95.6%, down 60 basis points sequentially, in line with the normal first quarter seasonality.
Rent collections remain very strong.
We effectively had no bad debt expense in the quarter.
Our share of cash same-store NOI growth was 4.5%, driven by the U.S. at 4.8%.
For strategic capital, our team raised $1.4 billion in the first quarter as investor demand remains robust.
Equity cues for our open-ended vehicles are at an all-time high, at more than $3 billion at quarter-end.
This level of interest is another indicator that valuations for high-quality logistics assets should continue to increase.
Looking at the balance sheet, we continue to maintain excellent financial strength with liquidity and combined leverage capacity between Prologis and our open-ended vehicles now totaling $14 billion.
We were able to get in front of the recent increase in interest rates and issued $3.5 billion of debt with a weighted average rate of 96 basis points and a term of 11 years.
This activity included the issuance of a 10-year U.S. dollar bond with the spread of 55 basis points, the lowest 10-year REIT bond spread ever and the completion of our 15th green bond offering.
The assets backing these bonds are the product of two decades of sustainable development.
Our debt maturity stack is in excellent shape with minimal maturities until 2026.
Subsequent to quarter end, we closed on a green revolving credit facility, adding $500 million more capacity to our already exceptionally strong liquidity position.
Moving to guidance for 2021.
Our outlook is more positive across the board.
Here are the updates on our share basis.
We are increasing our cash same-store NOI growth midpoint by 75 basis points and narrowing the range to 4.5% to 5%.
We now expect bad debt expense to be in line with our historical average at approximately 20 basis points in gross revenues, down from our prior guidance midpoint of 30 basis points.
We're increasing our average occupancy midpoint for our operating portfolio by 50 basis points to 96.5%.
Strategic capital revenue, excluding promotes, will now range between $450 million and $460 million, up $12.5 million at the midpoint.
The increase is primarily due to higher asset management fees resulting from increased property values.
Whether you look at public comps or recent transactions, both would indicate that our strategic capital business is significantly undervalued.
We are increasing development starts by $400 million, and now expect a midpoint of $2.9 billion.
Build-to-suits will comprise more than 40% of the volume.
Our land portfolio today comprised of land auctions and covered land place supports approximately $17 billion of future development.
We're increasing the midpoint for dispositions and contributions by $800 million in total.
Consistent with the rise in asset value and higher contributions, we're increasing realized development gains by $200 million with a new midpoint of $750 million.
Net deployment uses are now expected to be $50 million with leverage remaining effectively flat in 2021.
Putting this all together, we're increasing our core FFO midpoint by $0.06 and narrowing the range to $3.96 per share to $4.02 per share.
Core FFO, excluding promotes, will range between $3.98 per share and $4.04 per share, representing year-over-year growth at the midpoint of 12%.
Our efforts over the past 10 years to reposition the portfolio and balance sheet have set us up to outperform in 2021 and beyond.
And you're probably tired of us saying this, but it continues to be true, we believe the best years for the Company are still ahead of us.

user
q1 core ffo per share $0.97.
sees 2021 core ffo $3.96 to $4.02.
qtrly cash same store noi per prologis share up 4.5%.
sees 2021 cash same store noi - pld share to be up 4.5% to 5.0%.

assistant