Prologis and Union Pacific energy the arteries of commerce. Prologis (NYSE: PLD) owns and leases the warehouses and distribution facilities that preserve e-commerce buzzing, whereas Union Pacific (NYSE: UNP) operates the rails that haul these items throughout the U.S. heartland. Each profit from long-term shifts like e-commerce development, manufacturing revival, and infrastructure reinvestment. However for traders searching for a mix of earnings and long-term tailwinds, Prologis could supply the stronger case. This is why.
Picture supply: Getty Photos.
Prologis: actual property on a roll
Prologis is a behemoth of an actual property funding belief (REIT). To present you an thought of its scale: The $2.7 trillion in items that stream by way of its properties every year would make Prologis the eighth-largest economic system on the planet, and its warehouse footprint (1.3 billion sq. toes ) is sufficient to cowl the equal of two Manhattans. In contrast, STAG Industrial – a notable peer – owns simply 117.6 million sq. toes.
A lot of Prologis’ warehouses sit in the proper locations: close to main metro areas, near highways, ports, dense inhabitants facilities. These areas are perfect for same- and next-day supply, which is why many blue-chip giants — like Amazon, House Depot, and FedEx — have lease agreements with it.
A have a look at Prologis’ most up-to-date earnings underscores the highly effective moat the corporate is digging. In Q1 2025, it signed 58 million sq. toes of latest leases (up from 48 million in Q1 2024) and broke floor on $650 million in new developments (up from $273 million final yr). About 78% of those had been build-to-suits, which means the leases had been pre-signed earlier than development even started. That is properly above the business’s 25% build-to-suit common, in accordance with JLL . This sharply lowers the danger of emptiness, which issues when a single massive 500,000-square-foot warehouse can price about $40 million to construct.
New lease enlargement is matched by development within the precise money generated from its core operations as measured by way of funds from operations (FFO), which rose 10.9% in Q1 . That bump got here from robust tenant retention and rising rents. Those self same dynamics pushed internet working earnings up 6.2 %, which reveals that Prologis is extracting extra worth from each sq. foot it owns. These are robust outcomes for any REIT — and much more spectacular at this scale. Because the chart under reveals, Prologis’ working income is a number of instances larger than even its closest friends.
To underscore the chance, simply comply with the numbers. E-commerce at the moment makes up about 24% of U.S. retail gross sales (excluding autos and gasoline) and is ready to climb previous 30% by 2030 . Every share level improve will demand roughly 60 to 70 million sq. toes of latest warehouse area — greater than 18% of Prologis’ current U.S. footprint.
That is a whole lot of new area, however this is the place it will get attention-grabbing: Prologis already owns sufficient undeveloped land to underwrite $41.2 billion of future warehouse builds. When demand justifies new ground-up constructions, then, administration can faucet into this immense struggle chest. With that, Prologis has every little thing in place — the land, the leases, the stability sheet — to be the infrastructure spine of on-line retail.
Union Pacific: the regular iron horse
Like Prologis, Union Pacific is a logistics big. As an alternative of warehouses, nevertheless, its actual property is 32,693 miles of monitor, and as an alternative of hire checks, it makes cash hauling freight, like coal, grain, and vehicles. Each firms would revenue from an e-commerce growth, but on the subject of development, Union Pacific would not have practically as a lot upside.
A part of the reason being the inherent constraints of Union Pacific’s railroad enterprise. In contrast to Prologis, which may purchase land in untapped markets, Union Pacific spends most of its capital retaining current tracks in form as an alternative of the pricey slog of laying new rails. Relatively than increasing its footprint, Union Pacific should drive development by way of effectivity, like sharper pricing energy and squeezing further quantity from its current community.
Which, to make sure, is what Union Pacific is doing. Below CEO Jim Vena, who took the reins in August 2023, Union Pacific has tightened operations, broadened margins, and delivered items with precision. In its newest quarter, a rebound in intermodal and bulk cargo — paired with stable pricing self-discipline and tight price controls — helped Union Pacific preserve its effectivity regular, enhance carload income by 7%, and crank out $2.2 billion in money.
In contrast to Prologis, nevertheless, Union Pacific’s development is tied to broad freight cycles and a community nearing capability. This leaves it with fewer levers for main long-term upside regardless of operational excellence.
That mentioned, Union Pacific does have a sexy worth proper now. Tariff information has principally spooked traders, at the same time as the corporate’s fundamentals stays stable. Granted, tariffs might dent Union Pacific’s income, but the corporate’s no spring hen. In its 163-year historical past, it has weathered two World Wars, a Nice Melancholy, and each market storm in between. For worth seekers, then, this sell-off might current a uncommon likelihood to seize a confirmed workhorse at a reduction earlier than the market realizes the engine remains to be buzzing robust.
So, which is the higher purchase?
Each firms sit on the coronary heart of American’s logistics grid, but Prologis holds the sting. Not solely is it including warehouse area at the moment, nevertheless it owns the land to gas e-commerce’s subsequent huge growth. It additionally throws off a sexy 3.8% dividend – eclipsing Union Pacific’s 2.4% — so that you’re getting yield and upside in a single package deal. For traders searching each dividend and development, then, Prologis matches the invoice.
Steven Porrello has no place in any of the shares talked about. John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. The Motley Idiot has positions in and recommends Amazon, FedEx, House Depot, Prologis, and Union Pacific. The Motley Idiot recommends the next choices: lengthy January 2026 $90 calls on Prologis. The Motley Idiot has a disclosure coverage.
