By Kristin Broughton

Prologis for decades has developed warehouses with the backing of its asset management arm. Now looking to capitalize on the AI boom, the company might soon fund data centers the same way.

The world's largest owner of industrial real estate is talking with investors about launching a co-investment vehicle focused on data centers, which would be its first such fund targeting a sector outside logistics.

The discussions have been exploratory, said Tim Arndt, the company's chief financial officer. "The interest is very real, and probably beyond our expectations," he said. Prologis expects to make a decision in the coming months on whether to move forward, and the possible structure, he said.

Tech companies are pouring billions of dollars into AI, investing in data centers in a frenzied race for computing power. Real-estate companies are capitalizing on the surge in demand. Prologis, which has been building data centers for years, has taken steps in recent years to ramp up development, hiring staff and buying equipment. A new investment vehicle could provide an additional source of capital to expand that business.

"It's a way for them to get scale," said Michael Carroll, an analyst at RBC Capital Markets.

This year, Prologis expects to break ground on between $4 billion and $5 billion in new developments, with data centers accounting for approximately 40% of the projected value. Last year, new development starts totaled approximately $3 billion, with about 10% coming from data-center projects, according to the company.

As part of its asset-management and private-capital arm -- which Prologis calls its strategic capital business -- the company manages co-investment funds, joint ventures and other investment vehicles.

The funding strategy works like this: Prologis finances a development using its balance sheet, and then sells the property to one of its funds, whose investors include sovereign-wealth funds, pension funds and others. The company retains a stake in the property, and then uses the proceeds of the sale to invest in more development.

At the end of 2025, the company co-owned about $34 billion worth of property with its asset management arm, and wholly owned an additional $128 billion.

Prologis currently develops data centers for other companies, and then sells the properties in full. A potential data-center fund would provide a new buyer of sorts and source of capital.

Prologis has analyzed its land portfolio, identifying properties that could be suitable for data centers, either through new construction or refurbishing existing warehouses.

About 3,000 acres of the company's 14,000-acre "land bank" are suitable for data-centers because of the properties' locations and access to power, according to estimates from Vikram Malhotra, senior analyst with Mizuho Americas. Prologis, which owns properties globally, has secured 1.8 gigawatts of power from utilities, and has said it has an additional 3.9 gigawatts in late stages of procurement, Malhotra said.

"Anyone who has a large enough parcel, with power -- suddenly that land becomes more valuable," Malhotra said.

Prologis anticipates margins of between 25% and 50% on the sale of data centers, compared with margins of between 15% and 20% for warehouses.

The company also generates asset and management fees from the properties it sells to its strategic capital business. Last year, it earned $592 million in fees from its strategic capital business, accounting for about 7% of its total revenue.

While equity investors have conviction on the value of a warehouse at the end of a lease, they're less certain about the value of data centers, said Ronald Kamdem, head of U.S. real-estate investment trust and commercial real-estate research at Morgan Stanley.

A new fund could be attractive to Prologis's shareholders because it would ensure potential risk on the balance sheet remains minimal, he said. "It's still early for this asset class," Kamdem said.

Write to Kristin Broughton at Kristin.Broughton@wsj.com

(END) Dow Jones Newswires

February 04, 2026 06:00 ET (11:00 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.