Prologis Property Mexico SA de CV

OTC:FBBPF

Earnings Call Analysis

Strong Q2 Performance Driven by E-commerce and Nearshoring

FIBRA Prologis enjoyed a robust second quarter, with market demand reaching 11 million square feet, a 10% year-over-year increase fueled by e-commerce growth. Occupancy remained high at over 98%, and the company achieved a record rent change on rollover of 58%. The same-store cash NOI grew strongly, and the balance sheet remains a strong competitive advantage. Revenue guidance for the year shows optimism, expecting to hit the high end of the predicted range. An acquisition was made in Reynosa, and a public tender offer for Terrafina aims to add significant value by enhancing customer service. Net absorption was solid at 5.5 million square feet, with vacancy increasing slightly to 2.7%.

Optimistic Outlook on Industrial Growth

During the recent earnings call, FIBRA Prologis' CEO, Hector Ibarzabal, expressed strong optimism regarding the industrial sector in Mexico. Following the recent presidential elections, significant attention is now directed towards enhancing industrial park growth, reflecting a shift that could favorably impact real estate investment in the country. Notably, market demand surged to record levels of 11 million square feet this quarter, representing a 10% year-over-year growth, largely driven by the booming e-commerce sector in Mexico, which outperformed global averages significantly.

Strong Financial Performance

FIBRA Prologis reported robust financials, with Funds From Operations (FFO) of $64 million, reflecting a 9% increase compared to the previous year. Adjusted Funds From Operations (AFFO) skyrocketed to $56 million, showing a remarkable 34% increase. This remarkable growth can be attributed to significant rent changes during lease renewals, achieving a stunning 58% net effective rent change on rollover for the quarter. Additionally, both same-store cash and GAAP Net Operating Income (NOI) improved by 12% and 11%, respectively, which reinforces operational efficiency.

Market Dynamics and Occupancy Trends

Despite an increase in vacancy by 100 basis points to 2.7%, FIBRA Prologis maintains a healthy occupancy rate above 98%. The increase in vacancy is attributed mainly to pre-leasing activities and consolidation of spaces rather than an oversupply of properties. Market trends remain positive, with expectations for substantial net absorption figures to ramp up in the second half of the year, driven by anticipated new deliveries, particularly in the e-commerce sector. Ibarzabal projected market rents to continue growing, estimating a range of 5% to 7% for 2024 and 7% to 9% for 2025.

Acquisition and Development Plans

FIBRA Prologis reiterated its ambitions in acquisitions, confirming a guidance of approximately $300 million in acquisitions for 2024. Currently, they have 4.8 million square feet under development. The planned acquisition of Terrafina is noteworthy, aiming to enhance the portfolio with properties that can be improved efficiently, thereby increasing overall asset value. The tender offer for Terrafina will expire shortly, with a total cash amount offered being around MXN 3.5 billion, representing about 10% of the total amount of the offer.

Sustained Growth despite Political Uncertainty

The leadership acknowledged potential cautiousness among new clients due to the proximity of U.S. elections. However, the prevailing sentiment among established customers remains robust, with FIBRA Prologis well-positioned to capture ongoing demand, particularly from the logistics sector. The emphasis on nearshoring amid geopolitical shifts suggests that FIBRA Prologis could continue to thrive, capitalizing on its strong operational leverage and strategic positioning within the market.

Challenges and Future Expectations

While facing potential pressures on profit margins due to rising operational fees tied to increased property values, FIBRA Prologis remains confident in its growth trajectory. The management does not foresee any adverse impact on margins as a result of strategic decisions made during this period. Looking ahead to the rest of 2024 and into 2025, strong occupancy rates and dynamic market conditions are anticipated to support sustained growth.

Earnings Call Transcript 2024-Q2

[Operator]

Hello, everyone, and welcome to the FIBRA Prologis Second Quarter Earnings Conference Call.

[Operator Instructions]

I'd now like to hand over the call to Alexandra Violante, Head of IR. Please go ahead.

[Alexandra Violante, executive]

Thank you, Ellie, and good morning, everyone. Welcome to our second quarter 2024 earnings conference call. Before we begin our prepared remarks, I would like to remind everyone that all the information presented in this conference call is proprietary and all rights are reserved. The information has been prepared only for information purposes and is not a solicitation of an offer to buy or sell any securities.

Forward-looking statements during this call speak only as of the date of this call. Our actual results, performance, prospects or opportunities may differ materially from those expressed in or implied by the forward-looking statements. Additionally, during this call, we may refer to certain non-accounting financial measures. The company does not assume any obligation to update or revise any of these forward-looking statements in the future, whether as a result of new information, future events or otherwise, except as required by law.

As is our practice, we have prepared supplementary materials that we may reference during this call as well. If you have not already done so, I will encourage you to visit our website at fibraprologis.com and download this material. Today, we will hear from Hector Ibarzabal, our CEO, who will discuss our strategy and market conditions; and from Jorge Girault, our Senior Vice President of Finance, who will review results. Also joining us today is Federico Cantu, our Head of Operations; and Alejandro Chavelas, our Head of Valuations and Research.

With that, it is my pleasure to hand the call over to Hector.

[Hector Ibarzabal, executive]

Thank you, Ally, and good morning, everyone. Early last month, we had presidential elections in Mexico. Setting aside political preferences, we are pleased to see that Claudia Sheinbaum has placed special attention to our sector. As part of the new administration agenda, for first time, there's a specific focus to enhance industrial parts growth and development. We are having initial conversations with specific plans regarding energy, entitlement and security have been highlighted. We expect this trend to continue as nearshoring development will be an important priority on the national agenda going forward.

Second quarter, we had strong results continue to demonstrate a well-executed strategy. We remain optimistic for the remainder of the year. Let me provide you some highlights of the quarter. Market demand in the quarter was at record high levels at 11 million square feet, growing 10% year-over-year. Accelerated e-commerce activity drove this. As a reminder, e-commerce sales in Mexico grew 25% last year, much higher than the 10% global average.

E-commerce players in the country are responding proactively increasing their footprint. Occupancy in our portfolio remains at a great level, above 98%. We reached a new record in our rent change on rollover with 58%, and we continue to see a strong same-store cash NOI growth. Additionally, last week, we announced an acquisition from our sponsor. It is a facility located in Reynosa, in one of our parks, leads to a Prologis customer that is expanding its operation in Mexico. Also, as you all know, we made a public tender offer for Terrafina. I believe we can add important value to those assets through customer service and the adequate properties improvement. I am optimistic about the outcome of our plan, and Jorge will provide more color about the process.

Talking about market conditions. Net absorption in our 6 market was 5.5 million square feet, a strong number, but down versus the exceptional levels seen on previous quarters. The strong leasing activity did not translate fully to net absorption due to a high level of preleasing and to a lesser extent, due to some space consolidations. Net absorption is still well ahead of prepandemic levels. Vacancy increased 100 basis points to 2.7%, a very healthy level. As a reference, our underwriting standards always include a 5% vacancy as common practice. Our third-party appraised values increased approximately 1%. This is the sixth quarter in a row where we have experienced appreciation in the value of our portfolio.

Let me provide additional color. Mexico City saw practically non net absorption due to the lack of suitable product for clients' needs. Vacancy remains at low levels of 1.6%, and there were no deliveries of space in the quarter. We expect net absorption to ramp up meaningfully in the second half of the year as we expect substantial deliveries of pre-leased, particularly for e-commerce.

Monterrey keeps on being the market with the highest net absorption at 3.7 million square feet, stable versus last quarter. However, we saw a significant acceleration in deliveries, leading vacancy to increase slightly. Vacancy remains at very healthy levels below 2%. Guadalajara vacancy stands at 2.5%. We believe this market will continue with upward trends as the construction pipeline is low, while tenants are actively looking for additional space.

Regarding the border markets, vacancy reached 3.9%, which was led by elevated supply in these markets. However, based on the construction in these markets has declined by half from its peak, and we expect balanced supply-demand conditions going forward.

To summarize, we had a strong operations and all-time record rent change during the first half of the year. We have visibility through our portfolio and remain optimistic on market conditions for the rest of 2024. We have a 51% in-place rent to market, this allows us to continue pushing rents up and be able to create value to our portfolio. On the external front, we ratify our acquisition guidance, and we expect to reach the mid- to high end. Our sponsor [indiscernible] has 4.8 million square feet under development, and we are working as well on sizable third-party acquisitions.

Our balance sheet is one of our important competitive advantage that provides us flexibility and ample firepower going forward. Finally, as you all know, we remain committed to our shareholders and always placing their interest first.

With that, I will pass the call over to Jorge.

[Jorge Girault, executive]

Thank you. Thank you, Hector, and good morning to everyone. We started the year with strong operating and financial results, which are testaments of market conditions, combined with well-thought strategy. Starting with our financial results. FFO was $64 million or $0.0485 per certificate, a 9% increase versus last year. AFFO reached $56 million for the quarter, a 34% increase versus last year and above our expectations. These results were driven by rent change on rollover and annual bumps.

Moving to our operating metrics. Leasing activity for the quarter was 1.3 million square feet, with a period end and average occupancy above 98%. Net effective rent change on rollover was 58% for the quarter and 50% for the 12 -- last 12 months. In terms of same-store cash and GAAP NOI for the quarter, we had an increase of 12% and 11%, respectively.

Moving to our balance sheet. It remains strong.

We recently announced an acquisition from Prologis, our sponsor, which was done using available cash. On this note, we will use around $300 million in 2024 in line with our guided acquisitions. Our balance sheet is an important strength and unique feature in the space with a total capacity of up to $1.8 billion.

On the ESG front, we have reached 90% of green certification for our buildings. Yesterday, we published our ESG report, which shows our progress and commitment on this front. We invite you to look at it as it has some improvements and new information. As Hector mentioned, we want to keep you updated on the tender offer we launched for Terrafina. We see tremendous value by adding Terrafina's assets to the FIBRA Prologis portfolio and managing them within the broad scale and capabilities of Prologis overall.

On the capital market side, liquidity will increase. Our balance sheet will be bigger and stronger as well as our access to capital going forward will also improve. As a result of the requirements set forth in the authorization granted by FIBRA Prologis, 2 FIBRA Prologis by the Technical Committee of Terrafina, our offer now expires next Monday, July 22nd.

Regarding our offer. Each Terrafina holder has the option to tender certificates for FIBRA Prologis at either an exchange ratio of 0.63 or cash at a price of MXN 45 per certificate, provided that the total amount in cash being offered is MXN 3.5 billion or around $195 million, which is the equivalent of 10% of the total amount of the offer. Therefore, if Terrafina holders elect on aggregate to tender for cash in excess of the MXN 3.5 billion, they will be scaled back and receive a pro rata cash amount on the rest in FIBRA Prologis CBFI.

We would like to remind investors that our offer will expire end of day July 22 and would like to reiterate that we have no conditions outstanding beyond the requirements that 50% plus 1 or more older standard of tender of the outstanding Terrafina CBFI. No assurance can be made that we will extend the offer period beyond July 22 unless legally required to do so, neither that we will conduct any subsequent tender offer similar to the current one once it expires.

Furthermore, it should be noted that residual Terrafina holders left behind will be unable to accept any other outstanding offer from any third party beyond FIBRA Prologis or its affiliates upon the successful closing of our tender. We would like to caution investors of limited liquidity that may potentially persist in Terrafina certificates, assuming the success of our offer. In compliance with the tender offer process, we won't be addressing questions related to Terrafina on this call. Please refer to the public information and feel free to reach out to Citibank team if you have any questions about the process.

Regarding our distribution, once the tender offer process is concluded, we will make public our dividend payment, which will be in line with our guidance of USD 0.141 per CBFI for the year divided by each quarter to all FIBRA Prologis holders.

In summary, we've been unique in our ability to generate leading growth over time not only through a superior business model and portfolio but also from our balance sheet and team. Our commitment and focus is simply to continue to deliver on these industry-leading and durable growth.

With that, let me turn the call to our operator to take your questions. Thank you.

[Operator]

[Operator Instructions] Our first question comes from Pablo Ricalde from Santander.

[Pablo Ricalde, analyst]

I have one question on the FIBRA Prologis market. We saw a huge hike in vacancy [indiscernible] points. Can you explain a little bit what happened there? It is something temporary? Or is it something about oversupply in the market? And when do you expect to reverse occupancy?

[Federico Cantú, executive]

Pablo, thank you for your question. This is Federico. With respect to Juarez, we did have a drop in our occupancy, and it was related to a 3PL customer that intended to consolidate into one of our recently completed buildings but decided not to. I'd like to highlight that we currently have 5 active prospects for such building, and we expect to lease it up before the end of the year.

[Operator]

Our next question comes from Gordon Lee from BTG.

[Gordon Lee, analyst]

A couple of questions. The first, I was wondering if you could if you could give us an update or if you could let us -- remind us what loan-to-value assumption you use when you say your firepower is $1.8 billion on the balance sheet? And the second question is I was wondering whether you sense any sort of change in the, let's say, approach or the speed or the desire for space from customers following the election. If, in general, you see a little bit more caution after the sort of financial volatility that we saw in the election or sort of underlying operating conditions in terms of interest appetite from potential customers remains the same?

[Jorge Girault, executive]

Thank you, Gordon. This is Jorge. You were cut off a little bit in the first part of the question but if I heard correctly, you wanted to understand what's the rationale between the $1.8 billion liquidity that we have through the balance sheet. The loan-to-value that we have here has a limited 35% and being below 5x from net to EBITDA -- net debt-to-EBITDA ratio. Remember, we have $740 million -- around $740 million of cash available.

[Hector Ibarzabal, executive]

With the second part of your question, Gordon, we still are seeing demand to be pretty strong. On the PLD earnings call that happened just yesterday, we were able to lease them from Hamid Moghadam, CEO, that Mexico was one of the strongest market within all the global Prologis network. And this is right. This year in Mexico, where one of the most important opportunities is happening as we speak. We are running election times in the U.S., and I will say the customers were driving -- taking decisions probably at 100 miles per hour, they have probably reduced to 75 to 80 miles per hour. There's still a very healthy decision-making process. We see the demand coming in strong, both from nearshoring and manufacturing. So we think that Mexico is in pretty good shape, and we will keep on performing above expectations, I guess, for the rest of the year.

[Operator]

Our next question comes from Pablo Monsivais.

[Unknown Analyst]

A little bit of a follow-up to Pablo's question. But talking about other markets, what are you seeing in terms of like the supply demand and balance? And if we should expect that this perhaps a typical move, so sometimes having a little bit more supply. What should you -- what are you seeing in other markets?

[Federico Cantú, executive]

Thank you, Pablo, for your question. This is Federico. I would like to highlight that the Juarez market reached 2.4 million square feet of net absorption year-to-date, and that is actually one of the highest on record. However, vacancy did reach 4.8% due to deliveries of vacant space, vacant buildings. Although we've seen significant construction in this market, it has tapered off year-to-date to 800,000 square feet. And we foresee a normalization as we approach year-end, and that is encouraging. We also see a pipeline -- a very strong pipeline of over 2 million square feet that has been tracked and is active. We have ample conversations, both for renewals and new customers.

As I highlighted on the previous question, we have 5 active prospects for the only vacancy that we have in Juarez. And to mention an example, I'd like to highlight one of the industries that is thriving in Juarez, the electronics industry, mainly driven by Taiwanese electronic manufacturing services companies who are building multistory manufacturing campuses, and we expect that -- those to come online over the next 6 to 9 months spurring additional demand. So all in all, we feel good about this market going forward.

[Operator]

Our next question comes from Francisco Suarez.

[Francisco Suarez, analyst]

Congrats on results. 3 very quick questions. The first one is, PLD discloses the U.S. space utilization is currently less of 85%. Can you share with us how the overall utilization rates are in Mexico in general, are those substantially higher or are similar to what we see on those -- on that market for PLD?

The second question relates more with -- what is the actual difference between in-place and market rents for the vintages for 2025? And if I may, the last question that I have is on -- basically on why you didn't change your guidance considering what we see -- what you disclosed on same-store cash NOI?

[Hector Ibarzabal, executive]

Okay. I will ask -- I will answer your first 2 questions and let Jorge to answer the last one. Utilization in Mexico, I would say that this is slightly higher than in the U.S. I could probably -- it's difficult to have a very accurate number on this. We are working on trying to be more accurate in the quarter. But I would say, we are probably between 87% to 90% of space utilization, which is a very healthy number.

As I mentioned in my opening remarks, the mark-to-market -- the in-place to market trend that we have in Mexico on the overall portfolio is 51%. We have shown in the past that we have the ability to capture this value. So I am positive that we will be able to keep on improving our NOI through taking in the renewals, the rent of the market. I think that going forward, market rents will continue to grow. The best estimation that I have for the remainder of the year is for market rent to grow still between 5% to 7%. And for 2025, for sure, market rents will keep on having a positive level probably between 7% to 9%. So the business is still strong. There are positive trends in infrastructure, as I mentioned as well, but it will take some time to be placed into work. So what we're expecting is a very strong end of the year in 2024 and a very positive year as well in 2025.

[Jorge Girault, executive]

And Paco, regarding your question, our guidance is -- on same-store cash NOI is 8.5% to 10.5%. And as we disclosed in our guidance page in the supplemental, we're using at MXN 19 as an exchange rate. To be fair, I think we're going to be in the high side of the range at the end of the year. We have -- we still have the U.S. elections coming up. You saw what happened last Saturday, unfortunately, had a direct effect on the stock exchange in Mexico and the FX. And as you're right in your report, we still need to see what happens in September with the Supreme Court. So with all those amount on -- the uncertainties, if you may, I -- you know me, I try to be very conservative on those matters. I don't have -- we don't have a crystal ball, so I kept the forecast for FX the same, and that's the reason why we didn't change it. But you can expect to be in the high part of the range.

[Francisco Suarez, analyst]

Very clear. But if I may, can you disclose the specific difference between market rents and in-place rents only for the 2025 vintage that is substantially high, by the way, the expirations on 2025?

[Hector Ibarzabal, executive]

Yes, Paco. Just to address that question, for the 2025 vintage expirations, we have 67% in place to market. So we expect to continue to harvest over 5 and beyond. I don't know if that answers your question.

[Operator]

Our next question comes from Gabriela [indiscernible] from GBM.

[Unknown Analyst]

I was wondering if you could provide more color on your acquisition pipeline as well as give us some information if you have any Chinese clients?

[Hector Ibarzabal, executive]

Regarding -- it was hard to listen to the second part of your question. Regarding the acquisition pipeline, currently, Prologis has 4.8 million square feet. Basically, we are having activity in all of the markets, Mexico city, Juarez, Reynosa and important project that Prologis sponsor has in Tijuana. I mentioned in my opening remarks, we are working on important third-party acquisitions. And you should expect a positive news before year-end in this regard, hopefully, next quarter. It is hard to have visibility on third-party acquisitions. But what I can anticipate is that we will be proactively participating and always trying to provide our rational price taking advantage of our low cost of capital.

I will pass the word to Federico for the second part of the question.

[Federico Cantú, executive]

Yes, Gabriela, can you please clarify the question because it was hard to listen. Is it related to Chinese prospects or Chinese customers that we have in our portfolio? If you could please.

[Unknown Analyst]

Yes. Both of those, please.

[Federico Cantú, executive]

Okay. Yes. So we are -- we indeed are seeing, as we all know, there's been interest from Chinese companies in establishing, especially in the North markets. So we do have in our pipeline some Chinese customers. As it relates to our portfolio, we have just 2 Chinese customers, and that represents less than 1% to be specific, 0.7% of our portfolio. So we do have, I would like to mention some of our customers that do supply Chinese companies. So there is an indirect relationship but that is our current exposure.

[Operator]

Our next question comes from Adrian Huerta from JPMorgan.

[Adrian Huerta, analyst]

My question has to do with the fees given the increase that we have seen on property values in the last 3 quarters -- obviously in the last 6 quarters, the fees have been diminishing margins. And I believe it will take time for revenues to recover as quick as the property value does. So does this mean that we should see some pressure on margins in the next couple of quarters until revenues actually reflect what that new property value you have on the balance sheet? Is that a correct assumption?

[Hector Ibarzabal, executive]

Thank you, Adrian, for your question. A little bit of our fee structure is according to market conditions. I understand the concern about the values have been increasing. And as a consequence, the fees have been increasing as well. We do see this as an alignment of objectives between investors and Prologis. And I think that the performance of the returns have been evident, we are fully incentivized to try to increase rents and as increasing rents will increase the value of our properties. This -- the rate increase takes some time to go through the P&L. So eventually, the margins as the rents and the NOI are increasing, the margins will be kept according to the levels that we have been used to. I don't see that the fees is a danger for our margins to be reducing.

[Adrian Huerta, analyst]

At least for a few quarters, we should see some pressure on margins on the back of that but that it will take longer for the revenues to reflect those new property values. It will eventually do. But it will be a few quarters where it will be a little bit of a drag on margins, right?

[Jorge Girault, executive]

Yes, Adrian. That was exactly the point that Hector made.

[Operator]

[Operator Instructions] Our next question comes from Ramos from Bradesco BBI.

[Rodolfo Ramos, analyst]

Hector, Jorge, just a follow-up on one of the previous questions. I just got -- would like to get a little bit of color on your commercial discussions with tenants. And perhaps if you can elaborate on your remarks about clients willing to wait to increase their existing footprint. Also, cut my attention, the lower customer retention rate, I don't know if it was more particular to the quarter but lower than previous ones. So if you could elaborate on those 2 points, that would be great. I don't know if record lease rollovers are impacting or just the more challenging global outlook. Happy to hear your thoughts there.

[Hector Ibarzabal, executive]

Thank you for your question. Retention rates shouldn't be a concern when we are presenting these levels of occupancy and these levels of rate change. We had a couple of customers that left the space because of price, all of the other customers that left were some different type of reasons. One of the consequences and the only mechanism that we have to understand where really market trends are to pushing these rents. And fortunately, as we have all the information regarding the market we have a very good success of doing this. And this is where our results on increasing in NOI, our rent growth are presenting.

Regarding our customers, I can tell you that the sentiment is still very positive. This is not the first time that we are facing U.S. elections. And what we have identified is that when there's U.S. elections imminent as we are in 2024, particularly new customers willing to enter into Mexico are the ones that keep very busy land to what the potential candidates are saying or are not saying or are arguing. I think we have 2 types of customers, those that for the first time are going to be in the market, and these are the ones that are probably taking slower decisions.

For customers that have been in Mexico forever, 20, 25 years, they are used to these cycles. And I think that the impact that they have to take their decisions and to cover their expansion plans is much less than for the first category. We do see the demand to remain strong. There's a lot of talking about near-shoring but consumption and e-commerce as well has been important drivers of the demand. And as you know, we are better positioned than no one to take advantage as well of the logistics sector.

[Rodolfo Ramos, analyst]

Perfect. And if I may do a follow-up to your initial comments about you hearing a very constructive message from Sheinbaum's team on energy. I would love to hear a little bit more if you can share a little bit of those discussions and where do you see concrete upside there?

[Hector Ibarzabal, executive]

Well, we all know that it's public information that now we have 2 important [indiscernible] process, the appointment of Marcelo Ebrard as Minister of Economic Development is one of them. Marcelo Ebrard has shown a full interest in understanding our needs and trying to facilitate our process. The second [indiscernible] that we have is Altagracia Gomez. With Altagracia, we were able to meet several times before the elections. And after the elections, she shows to be a very efficient manner to provide messages and to move forward with the different difficulties that we have. So we're optimistic. I think that this program is not a political speech. It's a real desire of facilitating nearshoring and investment in Mexico. And I think that, that's a very positive game changer for the industry. I think that customers and potential customers and potential expansions are realizing this situation. And this is why one of the ingredients why we feel that the demand will keep on being very powerful mix.

[Operator]

Our next question comes from Jorel Guilloty from Goldman Sachs.

[Wilfredo Jorel Guilloty, analyst]

I have 2. So first off, I wanted to understand around you increased vacancy expectations for your key markets by 100 basis points to 3%. You kept your guidance and change for the portfolio. So I'm trying to better understand that dynamic? Is it that you see a better performance for your assets because of positioning because of where we are on the cycle as it refers to your on the assets themselves?

And then the other question is, it's interesting that you're seeing this increase in vacancy but your net effective rent growth continues to go forward. So what I'm wondering is could this vacancy have an impact on these leasing spreads going forward? I mean, could we see a leveling off? Could they drop? Could we see them going higher? So those are my 2 questions.

[Hector Ibarzabal, executive]

We're not -- if I understood your question, we are not expecting vacancies, and we are not guiding that vacancies will increase. When we reach in 2023, our 99.8% occupancy is really very difficult in this business to go beyond 100% occupancy. The occupancy that we have today, 98.4% is an extremely good occupancy. I mentioned in my opening remarks, all of the underwriting considerations that we do, we incorporate a 5% vacancy. So we are way above the vacancy that we use in our models. I think that what is slowing a little bit but keep on being in a very healthy dynamic is the speed that customers are taken to make their decisions.

And I think this is a natural situation to the political times that we're experiencing. Most of our customers are multinational. So they are carefully monitoring what is happening and what are the political messages that the different candidates are providing. Our companies, our customers, most of them are global as well. So they understand politics and they have a very clear map regarding geographic and geopolitical risks. And in our conversations that we have with them, Mexico keeps on having a preeminent role on their priorities for investment. So the customer outlook is positive. I hope that everyone in the call ends up with this message because that's the way it is.

[Wilfredo Jorel Guilloty, analyst]

[Technical Difficulty] because we have been seeing a strong net effective growth rent growth pace. So the expectations for that to maintain itself for the foreseeable future?

[Jorge Girault, executive]

Can you -- Jorel, can you repeat that part? You were caught out at the beginning.

[Wilfredo Jorel Guilloty, analyst]

Yes, sure. I was going through my second question because the second question is like you've seen net effective rent growth hitting record levels and you did mention in your remarks about the market vacancy at the market level, right? And so I was just wondering about the leasing spreads, this net effective rent growth going forward? Is it your expectation for it to remain at an elevated level as we've seen currently?

[Hector Ibarzabal, executive]

Yes. We don't guide on rent growth but I can anticipate that before year-end, you will keep on seeing a very strong figure, probably the record figure that we might have. So I don't anticipate any issue different on that regard. And I do expect as well a very positive rent growth for 2025.

[Operator]

Thank you so much. That concludes the Q&A session. I'd now like to hand the call back over to Hector Ibarzabal, CEO of FIBRA Prologis.

[Hector Ibarzabal, executive]

Thank you very much. I appreciate everyone's time devoted to this call and to the information and reports that we presented. We are excited about the opportunity that we have for FIBRA Prologis in Mexico. Mexico is today one of the strongest Prologis markets within its global operations, and I can assure you that all Prologis team is fully engaged to bring the best value to our investors. Please have in mind that there is always an open invitation to contact for any questions or any property tool that you might be interested on doing. Thank you very much, and see you in the next week.

[Operator]

Thank you, everyone, for attending today's conference call. You may now disconnect. Have a wonderful day. Goodbye.