The Founder and CEO of Prologis on Staying Ahead of Disruptive Change

The greatest advantage any leader or organization can have today is the ability to anticipate change. At Prologis—now the world’s largest real-estate-investment trust (REIT), with $215 billion in assets under management and 6,000 properties facilitating the equivalent of about 3% of global GDP—we have a proven history of getting ahead of client needs and shifting supply chain dynamics. In the 1990s, when we were known as AMB, this meant transforming ourselves from a fund management firm into a publicly traded REIT. In the early 2000s it meant predicting the rise of e-commerce and divesting retail in favor of distribution facilities. In the late 2000s and into the 2010s, it meant foreseeing the surge in global trade, expanding internationally, and embracing consolidation amid uncertain market conditions. Over the past decade anticipating change has involved adding a host of services to our customer offerings, partnering with emerging property and logistics technology startups, and most recently, preparing to build the data centers and energy production tools needed to power the AI age. We’ve been pioneers in so many areas not because we’re brilliant but because we follow a simple playbook: Listen to customers, position yourself to act, experiment, and then invest. Initial Pivots My comfort with trying new things comes from my early life. I grew up in Iran but left in 1970 for high school in Switzerland and then college at MIT, where I studied engineering. My father, who led our family business, passed away during that time. As the only son, I intended to move back to Iran and take over for him as soon as I graduated. However, when the Islamic revolution erupted, in 1978, that option was out. Instead I enrolled in Stanford’s MBA program, hoping to wait out the conflict. But then our family’s assets were nationalized, and I realized I couldn’t return home. Only in my early twenties, I’d learned how quickly and dramatically the world can change on you. I worked for a professor briefly while I applied for a work permit and American citizenship. In 1983, at age 26, I launched a real estate firm with a partner and a mentor; we called the firm AMB after our three initials. AMB started out advising owners of all property types—office, hotel, industrial, retail—and developed a reputation for helping people work their way out of problematic investments. In 1989 we launched our own $100 million fund focused on industrial and retail markets in U.S. western states. Despite the savings-and-loan crisis, we posted solid returns, which gave us the momentum to launch a second, $400 million fund. Eight years later we had about $5 billion in assets under management. By the 1990s it was time for another leap of faith—into a new corporate structure. REITs were developed in the United States in the 1960s to allow small investors access to income-producing property, and publicly traded REITs gained popularity in the early 1990s. While no real estate fund manager of our size had previously reorganized itself into an exchange-listed REIT, in 1997 we did exactly that, taking the company public and paving the way for many other large funds to follow. Anticipating the Future A few years after our IPO, we made another move that some deemed risky but that we believed was a smart bet on the future: selling off our entire retail portfolio. Why did we want to get out of the shopping centers that had served us so well in the 1980s? Because in 1999 I visited the first warehouse of the early internet grocer Webvan, at that time a dot-com darling. Those were still the days of dial-up internet, and online shopping hadn’t yet taken off. The efficiency of Webvan’s operations blew my mind; the firm could stock more items and deliver them to customers faster than any brick-and-mortar retailer could. We saw immediately how e-commerce could disrupt every category of retail. Distribution centers would be the new stores. We sold all our retail property to another big institutional player and put the proceeds into industrial logistics. We weren’t entirely prescient, however. We took a $5 million stake in Webvan and then watched the company’s valuation plummet from billions to zero between 2000 and 2002, while failing to invest in another early e-commerce startup we’d come across—a little online bookseller called Amazon. Still, our switch out of retail and into warehouses did prove to be the right long-term move, and the “everything store” is now our largest customer. By then we’d developed deep relationships with all our customers, so when one key account, Procter & Gamble, asked if we could help it set up a facility in Mexico City, we did. Building on that experience, we helped clients enter several European countries where laws were robust and capital markets well developed but where we could still outperform local players in terms of quality, speed, and reliability. From there we went to Singapore, Japan, and eventually China. We’re now in about 20 countries, with only three that we entered but exited: South Korea, where chaebol firms mostly work with their own logistics affiliates; Romania, which was too small a market for us; and Russia, which we at AMB had avoided but which our 2011 merger partner, ProLogis, had not. A competitor to AMB, ProLogis had struggled along with other REITs during the global financial crisis of 2008, owing to overleverage and a surplus of newly built space it couldn’t lease. It came close to filing for bankruptcy but, after a CEO change, cleaned up its balance sheet enough for AMB to consider combining with it to become the dominant player in industrial logistics. In 2011 we engineered a merger of equals: AMB, the smaller but more stable company, bought the bigger one, ProLogis, and then adopted its name (changing the “L” from uppercase to lowercase). Integrating two previously opposed, culturally disparate organizations was difficult. And yet we navigated through the challenges and then used the resulting platform to orchestrate four more big M&A deals from 2015 to 2022, further consolidating our industry to better serve our customers through streamlined scale. Finding New Business Lines Throughout my real estate career, I’ve focused on four questions: Where? What? How? What else? The where in our business has always been simple. We want to be in major population centers where there is high consumption and movement of physical goods: Los Angeles, the New York City tristate area, Chicago, London, and Tokyo, for example. Those places don’t have much undeveloped land, so if you build a big position (ours is about 15% to 20% of those markets), you’ve created one of the strongest strategic advantages possible in property. For the what, we pride ourselves on delivering some of the best warehouses in the world: the most-durable floors, the highest ceilings, the most-efficient loading configurations, and more. We also provide value-added services and solutions, including energy, sustainability, operations equipment, and technology. Clockwise from left: Prologis Park Ontario, in California; Moghadam and Fred Smith, the late cofounder of FedEx, at the Groundbreakers 2024 forum, in London; an automated racking system at a logistics facility Courtesy of Prologis And how do we do that? In part by fostering a culture that allows us to attract top talent. Our corporate values spell IMPACT: integrity (doing the right thing), mentorship (giving young people responsibilities they wouldn’t get elsewhere), passion (particularly for customer service and innovation), accountability (making good on our commitments and learning from our mistakes), courage (a willingness to experiment, change, and make bold moves), and teamwork (the collaborative spirit that drives everything we do). We also insist on maintaining a strong balance sheet, drawing on both private and public capital and minimizing leverage. This has allowed us to weather both real estate downturns and supply chain crises. What else? is perhaps the most critical question. We’re constantly asking, What are the near-adjacent businesses in which our skills will make us effective competitors? Most recently, this thinking has brought us into warehouse services, new technology ventures, AI and automation, data centers, and power generation. In 2017 an analysis we conducted showed that real estate accounts for only 3% to 6% of our clients’ supply chain costs. The rest is labor, energy, transportation, equipment, software, and more. We don’t have a right to play in most of those areas, because the entrenched incumbents are doing a fine job. But some do lend themselves to our involvement. That’s why we launched Prologis Essentials, which offers everything from power to racking systems to automation. No other property company offers the same suite of products and services, so there was no blueprint. But we thought it made sense, so we tried it. And while it took time to gain traction and makes up only a tiny part of our business, it’s been profitable since day one and is growing rapidly. There have been surprises along the way. We thought that being a middleman for forklifts—giving manufacturers access to dozens of customers and ensuring our clients always had the right equipment—could be profitable, but we quickly realized that all the margin is in maintenance (which is not our area of expertise), so we got out of that business. By contrast, we didn’t have high hopes for buying and selling racks, because every tenant has its own specifications and designs—but we learned that exiting lessees do want to off-load them while incoming ones are happy to reconfigure what’s there if it means paying less. Here’s another example of learning from experimentation: We expected to see the most demand for these ancillary services from smaller accounts, figuring that the larger firms would have their own procurement departments and processes. But we pitched the big guys too, and it turns out that they’re our heaviest users, happy to focus on their core products while we handle the warehouses. Essentials has helped us evolve from landlord to strategic partner. Our venture business is another way we stay connected with what’s next and deepen our relationship with senior leaders at client companies. Since 2016 we’ve assigned some of our smartest people to investigate emerging supply-chain-related technologies, and so far we’ve given them some $250 million of capital to invest in around 50 startups. Some haven’t panned out, but others, such as Timee, a Japanese on-demand labor platform, and Flexe, a U.S.-based warehouse-rental-platform developer, have worked out nicely. More important than the returns, however, are the insights we gather on cutting-edge innovation, which we can then share with customers. AI, Data, and Power We can’t talk about disruptive technologies without addressing artificial intelligence. Internally, it’s helping us streamline and automate day-to-day functions, collect and analyze data across properties to find ways to increase efficiency, and weigh capital allocation decisions. Externally, the rise of AI combined with labor shortages is pushing our clients toward automation. With that growth comes demand for more computing capacity, which means more data centers and more energy—two resources Prologis is uniquely positioned to provide. Left: The Denker heavy-duty EV-charging hub in Southern California; right: Prologis Ports Jersey City, in New Jersey Left: Scott Lorenzen Photography; right: courtesy of Prologis In metro areas, we control 13,000 acres of buildable land (enough to fit a few hundred million square feet of real estate) as well as thousands of warehouses suitable for conversion to data centers. For perspective, all the data centers ever built in the world constitute about 120 million square feet. Yes, it’s also possible to build massive campuses for powering AI where land and power are abundant, and we’ll be a player in that too. But the bigger opportunity, where our 6,000 existing buildings give us a unique competitive advantage, will be the conversion of some of our infill warehouses into low-latency “inference” data centers. The next step is energy. A warehouse with modern automation and EV-charging stations needs five to 10 times more power than a traditional warehouse does. A data center requires 60 to 70 times more power than a standard facility does. Energy is so critical to our and our clients’ businesses that we now have approximately 150 people focused on it—whether they’re working with traditional utility companies or figuring out how to bring renewable energy to our properties. We’re particularly interested in on-site power via linear generators, fuel cells, and in the future, small modular nuclear reactors. A Simple Playbook Over the years I’ve seen many capable leaders hesitate when facing change. Education and experience can create patterns that are hard to break. I learned early on how quickly unforeseen events can derail even the best-laid plans, and that adaptability isn’t optional—it’s essential. That lesson shaped how we built the company: by staying agile, anticipating shifts, and leading through uncertainty rather than reacting to it. It all starts with listening. If you ask clients the right questions and pay attention to their words and actions, they will tell you everything they need done, what they don’t want, and how much they’re willing to pay. Just recently, a large tenant came to us saying, “Guys, go ahead and charge us more rent—just make our life easier.” Another key to navigating change is having financial strength that gives you the flexibility to act fast. This helps you serve customers through a crisis—whether it’s fixing roofs after a hurricane or an earthquake or adjusting routes in response to a pandemic shutdown, newly imposed tariffs, or a ship getting stuck sideways in the Suez Canal. A strong balance sheet also positions you to respond to technological disruption, because you have the money to invest in new ventures. See more HBR charts in Data & Visuals Experimentation is also essential. We’re always thinking about what’s next and running low-cost trials to test our intuitions and hypotheses. The market will tell you whether you have a right to play in new waters, but if you don’t dip your toe in, you’ll never find out. Finally, you have to trust in your results, spend more on what works, and scale those efforts into meaningful parts of the business. That requires a lot of courage, effort, and capital, which can feel hard in uncertain times. But we know that long-term success doesn’t come from coasting. It comes from future-focused evolution. On January 1, 2026, after 42 years as the CEO of Prologis, I will step down from the role but stay on as executive chairman. Dan Letter, a 20-year veteran of the company, will step into the CEO role. Like all our team members, he knows the playbook for continued success. By paying attention to customers, maintaining a strong position, experimenting with innovation, and making smart bets, we will keep ourselves ahead of the curve.

The Founder and CEO of Prologis on Staying Ahead of Disruptive Change

Summary.

Partner Center