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Prologis (NYSE: PLD) isn't a stock that goes on sale often. The logistics real estate company has excellent asset quality, top-notch credit, and a tenant list that reads like a Who's Who of e-commerce and shipping companies.

However, because of interest rate headwinds and geopolitical risks, as well as somewhat pessimistic short-term guidance from management, Prologis is now trading for more than 20% below its recent highs. But for patient long-term investors, it looks like an opportunity.

What does Prologis do?

Prologis is a real estate investment trust, or REIT, that specializes in "logistics" real estate. Its properties are mainly distribution centers and warehouses, and it leases space to e-commerce, retail, and logistics companies, including Amazon.com (NASDAQ: AMZN), FedEx (NYSE: FDX), Home Depot (NYSE: HD), and about 6,700 others.

As a REIT, Prologis' scale is simply unmatched. It is the largest REIT in the world, with more than 1.2 billion square feet of rentable space and $216 billion in assets under management. It operates in North America, Western Europe, Asia, and in some parts of South America. Over the years, Prologis has grown its funds from operations (FFO -- the real estate equivalent of earnings per share) and its dividend faster than other industrial REITs.

Growth opportunities

Despite its massive size, Prologis isn't necessarily done growing yet. The boom in e-commerce may have slowed since the pandemic-fueled growth period, but it's important to realize that e-commerce still only makes up about 15% of U.S. retail sales, and even less in many of Prologis' international markets.

In addition, Prologis recently announced that it is getting into the data center space, where AI is creating a ton of demand, and that it will be investing rather aggressively.

Last but certainly not least, Prologis has a ton of embedded rent growth in its current portfolio. To put in mildly, the COVID-19 pandemic caused a surge in demand for logistics properties, and a corresponding surge in rental rates. Since most of Prologis' tenants are on leases with five- to seven-year terms or longer, we're still seeing leases gradually renew into higher rents.

In fact, in the first quarter of 2024, Prologis' cash rent growth on both new and renewal leases was a staggering 48%. The company said that at the end of 2023, the difference between the market rent and what its tenants were actually paying was 57%. So over the next few years, we're going to see a lot of rental income growth from the existing portfolio of properties.

Temporary headwinds create a buying opportunity

To be fair, Prologis is down for a reason. Not only are REITs generally interest rate sensitive, but because of the global nature of Prologis' business, it is also sensitive to the geopolitical uncertainty in the world right now. In its first quarter earnings report, Prologis reported a drop in both its occupancy and retention rate (both are still strong), and management said that the next quarter or two could be challenging.

However, this creates an excellent opportunity for long-term investors. Prologis is still a powerhouse REIT with massive long-tailed growth potential, and it has a well-covered 3.6% dividend yield for income investors. While the short-term may be turbulent, this could be one of the biggest beneficiaries once rates start to normalize and economic fears start to subside.

Should you invest $1,000 in Prologis right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Matt Frankel has positions in Amazon and FedEx. The Motley Fool has positions in and recommends Amazon, FedEx, Home Depot, and Prologis. The Motley Fool recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.