Prologis, Inc. (NYSE:PLD) Q2 2019 Earnings Conference Call - Final Transcript
Jul 16, 2019 • 12:00 pm ET
Welcome to the Prologis Q2 Earnings Conference Call. My name is Chris, and I will be your operator for today's call. [Operator Instructions] Also note, this conference is being recorded.
I'd now like to turn the call over to Tracy Ward. Tracy, you may begin.
Tracy A. Ward
Thank you, Chris, good morning, everyone. Welcome to Prologis second quarter earnings call. If you have not yet downloaded the press release, it's available on Prologis's website at prologis.com under Investor Relations. This morning, you will hear from Tom Olinger, our Chief Financial Officer and Gene Reilly, Prologis's Chief Investment Officer. Also joining us today for the call is Hamid Moghadam, Gary Anderson, Chris Caton, Mike Curless, Ed Nekritz and Colleen McKeown.
Before we begin our prepared remarks, I'd like to state that this conference call will contain forward-looking statements under Federal Securities laws. These statements are based on current expectations, estimates and projections about the market and the industry in which the company operator as well as the beliefs and assumptions of management. Some of these factors are referred to and Prologis's 10-Ks or SEC filings.
Additional factors that could cause actual results to differ include, but are not limited to the expected timing and likelihood of the completion of the transaction with IPT including the ability to obtain the approval of their stockholders and the risk that the conditions of the closing of the transaction, may not be satisfied.
Forward-looking statements are not guarantees of performance and the actual operating results may differ. Finally, this call will contain financial measures such as FFO, EBITDA that are non-GAAP measures and in accordance with Reg G, the company has provided a reconciliation to those measures and it's, and our earnings package.
With that, I will turn the call over to Tom. Tom, will you please begin.
Thomas S. Olinger
Thanks, Tracy. Good morning, and thank you for joining us today. We had another excellent quarter. Our proprietary operating metrics continue to reflect strong demand. Shellings, average gestation and conversion rates remain either in line or better than last quarter as our customers further build out their supply chain capabilities in the [Technical Issues].
Market conditions in the U.S. continue to be very healthy. Demand is diverse and overall supply is disciplined. Starts in the U.S. are concentrated in low-barrier markets, while supply and the high-barrier markets is not keeping pace with GDP growth. Let alone demand for logistics facilities closer to the end point of consumption. Continental Europe remains strong and we expect rent growth this year to be the highest in more than a decade.
In Japan, despite moderating economic growth business is quite good. Demand continues to be boosted by e-commerce while supply is being steadily absorbed. With the improvement we are seeing in the Osaka market we are removing it from our market watchlist.
We are raising our 2019 global rent growth estimate by approximately 100 basis points to over 5.5% as low vacancies and rising replacement cost continue to push market rents higher. Looking to