Real estate investment trusts, or REITs, aren't well known for their volatility, and as a group, they tend to be more resilient than the typical S&P 500 company during tough times.

We're seeing this during the recent market downturn. The S&P 500 is down by roughly 12% as of this writing, since President Trump's tariff plan was announced, but the real estate sector is down by less than 10%.

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However, one of the most rock-solid companies in the real estate sector has taken quite a beating. Industrial real estate giant Prologis (NYSE: PLD) has fallen by 17% since the tariffs were announced, and although there are certainly some valid concerns, the fact remains that this is a rock-solid REIT with a bright future, currently trading at a discount.

Prologis and tariffs

Prologis is the largest real estate investment trust in the world and specializes in logistics real estate. Think warehouses, distribution centers, and similar properties. In all, the company owns nearly 5,900 properties with a total of 1.3 billion square feet in 20 countries around the world.

As you might expect, Amazon.com (NASDAQ: AMZN) is the largest tenant, and other major Prologis customers include Walmart (NYSE: WMT), UPS (NYSE: UPS), Home Depot (NYSE: HD), and many other major retailers and logistics companies that are household names to most Americans.

To be fair, there are certainly some tariff concerns. Many of Prologis' major tenants import a lot of the products they sell (Amazon is certainly in this category), and there are concerns that demand for logistics properties could temporarily soften. As CEO Hamid Moghadam recently said, "In the interim, tariffs are inflationary and growth-reducing." But long-term, if tariffs lead to more domestic manufacturing, it could be a net benefit for Prologis, as U.S. businesses would need more logistics space. But to be clear, in the short term, tariffs are almost definitely a negative for the business.

Reasons to take a closer look

There are a few good reasons why Prologis could be a steal at the current price. For one thing, the business entered 2025 with strong momentum, with 10% year-over-year growth in funds from operations (FFO -- the real estate version of "earnings") in the fourth quarter and generally strong leasing activity.

Furthermore, industrial property values have declined in recent years because of falling demand and higher interest rates. At first, this might sound like a reason not to buy. But CEO Hamid Moghadam recently said that he sees the market near an "inflection point," and falling interest rates could cause these trends to sharply reverse course. With the latest expectation of four 0.25% Federal Reserve rate cuts in 2025, according to the CME FedWatch tool, there could be a nice tailwind coming.

With e-commerce accounting for 56% of all retail sales growth in the United States last year and expected demand for 250 million to 350 million square feet of new logistics space over the next five years because of e-commerce, there could be a strong environment for several years.

The company is also doing a great job of creating shareholder value through development and expects to spend $5 billion in 2025 alone. With $7.4 billion in liquidity and access to cheaper capital than peers thanks to its excellent balance sheet, the company has the financial flexibility to pursue opportunities as they arise.

Prologis also has a lot of embedded rent growth, as industrial rental rates soared during the pandemic years, and there are a lot of older leases that are yet to reset to the current market rents. In the fourth quarter of 2024, Prologis reported cash rent increases of 40.1% on new and renewal leases, and this elevated rent growth should continue for the next few years.

Last but certainly not least, Prologis has been quietly, but aggressively, getting into the data center real estate space, and sees a massive opportunity to scale.

Lots of upside potential

After the recent decline, Prologis trades for a historically low valuation of just 16 times its 2025 FFO guidance. And at the current price, the stock has a 4.3% dividend yield as well as a fantastic track record of raising its payout. In fact, the FactSet consensus estimates Prologis' net asset value at $125 per share, about 34% above the current stock price.

As mentioned, there are certainly some legitimate tariff concerns for a company whose primary business is leasing an international network of distribution centers. However, this business will be just fine over the long run, and we should have more clarity about how the tariff plans could affect the company's results when it reports earnings on April 16. But even before we see the latest numbers, Prologis has jumped toward the top of my buy list in the stock market downturn.

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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 Prologis. The Motley Fool has positions in and recommends Amazon, Home Depot, Prologis, and Walmart. The Motley Fool recommends United Parcel Service and recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.