Good day, and welcome to the first Industrial Realty Trust, Inc. second quarter 2025 results call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Art Harmon, Senior Vice President of Investor Relations and Marketing. Please go ahead.

Thank you, Michael. Hello, everybody, and welcome to our call. Before we discuss our second quarter 2025 results and our updated guidance for the year, please note that our call may include forward-looking statements as defined by federal securities laws. These statements are based on management's expectations, plans, and estimates of our prospects. Today's statements may be time-sensitive and accurate only as of today's date, July 17, 2025. We assume no obligation to update our statements or the other information we provide. Actual results may differ materially from our forward-looking statements, and factors which could cause this are described in our 10-K and other SEC filings. You can find the reconciliation of non-GAAP financial measures discussed in today's call in our supplemental report and our earnings release. The supplemental report, earnings release, and our SEC filings are available at firstindustrial.com under the Investors tab. Our call will begin with remarks by Peter Basile, our President and Chief Executive Officer, and Scott Musil, our Chief Financial Officer, after which we'll open it up for your questions. Also with us today are Jojo Yap, Chief Investment Officer, Peter Schultz, Executive Vice President, Chris Schneider, Executive Vice President of Operations, and Bob Walter, Executive Vice President of Capital Markets and Asset Management. Now let me hand the call over to Peter.

Thank you, Art, and thank you all for joining us today. Our portfolio continues to perform well, producing strong cash rental rate growth with a solid pace of renewals. Tenant leasing activity and investments to support new growth continue to move at a deliberate pace. The uncertainty around tariffs, whether they will be applied, where and when, and to what degree, continues to dampen momentum around decision-making. That said, we have a couple of success stories to share in the form of new development leases that I will review shortly. As we said on prior calls, a positive for our business is with new starts at a 10-year low. Even with modest net absorption, the available alternatives for new Class A space continue to diminish. This trend is reflected in the most recent metrics on the broad industrial market reported by CoStar. Vacancy in Tier 1 U.S. markets was 6.3% at the end of the second quarter and up 30 basis points compared to the prior quarter. On the demand side, according to COSTAR, net absorption year-to-date totaled 16 million square feet nationally and 5 million square feet in our target markets. We should also point out that there is a wide variation in reported net absorption. Depending upon the source you use, year-to-date net absorption ranges from negative 4 million square feet to positive 63 million square feet. nationally new construction start volume was 62 million square feet in the second quarter versus 66 million in the first quarter of 2025 and 72 percent lower than the peak of third quarter 2022 in our 15 target markets new starts were 37 million square feet and completions were 38 million Space under construction totals 204 million square feet, and that is 42% pre-leased. From a portfolio standpoint, our in-service occupancy at quarter-end was 94.2%, in line with our expectations, reflecting the known 708,000 square foot move-out in central Pennsylvania and the impact of two developments placed in service, partially offset by some new leasing. We've now taken care of 88% of our 2025 rollovers by square footage. Our overall cash rental rate increase for new and renewal leasing is 33%, and if you exclude the large fixed rate renewal in central PA we previously disclosed, the cash rental rate increase is 38%. This puts us on track to achieve our overall cash rental rate growth expectations of 30 to 40 percent and 35 to 45 percent, excluding the fixed-rate renewal. Moving now to developments, we are pleased to report that after we issued our press release, we leased the remaining 501,000 square feet of the 968,000 square foot building in our Camelback 303 joint venture in Phoenix. That brings the entire three-building 1.8 million square foot project to 100% leased. Per our press release, we also leased 58,000 square feet at our first loop project in Orlando. As discussed on our last call, we're underway on two new starts in the quarter. The first is a 176,000 square foot facility at First Park 121 in northwest Dallas. The second is the 226,000-square-footer at our First Park Newcastle project in the Philadelphia market. The total estimated investment for both of these projects is $54 million, with target cash yields of approximately 8% for each. Both of these opportunities are located in infill locations with low sub-market vacancies and target the 50,000 to 100,000-square-foot tenant segment. Turning to our capital markets activity, we reached two important milestones during the quarter. First, we were upgraded by Fitch to BBB Plus in early May. That upgrade was timely, as shortly thereafter, we launched our first public bond offering since 2007 in the form of $450 million of senior unsecured notes at a coupon rate of 5.25%. Demand from fixed-income investors was strong, and we appreciate their support for the offering. Let me conclude by saying thank you to my teammates around the country who are executing on our plan and taking care of our customers. With that, I'll turn it over to Scott.

Thanks, Peter. Let me recap our results for the quarter. Day refunds from operations were $0.76 per fully diluted share compared to $0.66 per share in 2Q 2024. Our cash same store NOI growth for the quarter, excluding termination fees, was 8.7%, primarily driven by increases in rental rates on new and renewal leasing and contractual rent bumps, partially offset by lower average occupancy. We finished the quarter with in-service occupancy of 94.2%, down 110 basis points from the quarter. As Peter noted, our occupancy change reflects the impact of the known move-out in central Pennsylvania and two developments entering the in-service pool, offset in part by some new leasing. Summarizing our leasing activity during the quarter, approximately 2.5 million square feet of leases commenced. Of these, approximately 400,000 were new, 2.1 million were renewals, and 100,000 were for developments and acquisition with lease-up. On the capital side, as Peter noted, we were very pleased with our return to the public bond market for the first time since 2007. Our $450 million unsecured notes issued in this offering mature in January 2031 and carry a coupon rate of 5.25%. We remain strongly positioned on the capital front with our next maturity coming in 2027, assuming all available extension options are exercised on one of our bank loans. We would like to thank our banking partners for their outstanding execution and support in this transaction. Now moving on to our guidance. Our guidance range for an AREAD FFO for the year remains $2.92 per share at the midpoint, with the range narrowed to $2.88 to $2.96 per share. Our assumptions are as follows. Average quarter-end in-service occupancy of 95% to 96%. This range reflects approximately 1.5 million square feet of development leasing soon to occur in the fourth quarter of this year. Cash same-store NOI growth before termination fees of 6% to 7%. As a reminder, our same-store guidance excludes the impact of the accelerated recognition of a tenant improvement reimbursement in 2024. for. Guidance includes the anticipated 2025 costs related to our completed and under-construction developments at June 30th. For the full year 2025, we expect to capitalize about nine cents per share of interest. And our G&A expense guidance range is $40.5 to $41.5 million. Now let me turn it back

over to Peter. Thanks, Scott. Our diversified operating portfolio continues to perform strongly, generating cash rental rate growth on new and renewal leasing amongst the top performers in our sector. When the tariff picture becomes more clear, we expect improved confidence, more timely decision-making, and an increase of investments in new growth initiatives. We remain focused on securing and serving existing and new customers to drive long-term cash flow growth. Operator, with that, we're ready to open it up for questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. And we also ask that you limit yourselves to one question and one follow-up. And your first question comes from Rob Stevenson with Jannie. Please go ahead.

Good morning, guys. Peter, incremental development starts from here, more or less attractive today than they were three or six months ago. And how is construction pricing, you know, in terms of labor materials today versus in the past?

Take the first part of that, Judge. you can talk about construction pricing. Like we said on the last call, you know, in order to really get deeper into new starts, we'd like to see more consistent development lease signings. There's a lot of activity in the market. The amount of gross leasing activity in the first half of the year was pretty strong relative to 2024. But we need to see more investment in new growth, more take up of development space. As you've seen, we have executed a new start in certain markets, and in those markets that we think continue to show good fundamentals and where there's demand that is going unmet, we'll continue to execute starts there. Joe, do you want to talk about the cost?

For construction costs, from the second half of last year, costs are down 5% to 10% depending upon the market. From the start of the year, the total construction cost has been pretty flat. The contractors have been more aggressive, so their margins have compressed, slight increase in construction costs. Keeping an eye on steel, there's some talk that steel might go up, but we haven't seen it. Contractors, though, are able to keep their pricing for 30 to 60 days, which is good. And you probably all follow this, there's been a tariff increase in topper. So, you know, you're looking at the electrical supply to switch gear. But these items have a small impact on the cost, maybe total cost under 1%.

Okay, that's helpful. And then, Scott, anything abnormal or not recurring in the second quarter FFO or anything expected to be sequentially a drag in the back half of the year? I'm just trying to figure out you guys did 76 cents, and just doing a flat 76 and 76 in the next two quarters puts you at the very high end of your current guidance range. I just wanted to get a feel for what's coming up here.

So I would say in the third and fourth quarter, recognizing more interest expense than in the second quarter, and Rob, that's driven by two items. we have to continue to fund our development pipeline. That's about $110 million of spend for the last six months of the year. So that's driving interest expense higher. Also, the May bond offering was slightly diluted. We used the funds to pay down our line of credit, and the line of credit had a lower interest rate than what the bond offering rate was. So on the back end of the year, you're going to see a little bit of higher interest expense, which will knock down our FFO in the third and fourth quarter.

Okay, that's helpful, guys. Thanks. I appreciate the time this morning.

And your next question comes from Vikram Malhotra with Mizuho. Please go ahead.

Morning. Thanks for taking the question. I just want to understand the new lease you just announced. That was not in the 1.6 million target. And if you can just sort of maybe walk us through some of the bigger pieces in the 1.6, like how do the prospects look for CQ and 4Q?

Peter, you want to talk about what's happening in your markets?

Sure. On the 1.6 million square feet that we have in our guidance at year end, the largest component of that is our building at First Aurora Commerce Center in Denver. We continue to have active prospects for all or portions of the building. In fact, a couple of the prospects have a need for rail, which we can accommodate on this site. Difficult to peg exactly when those get signed, but we continue to be pleased with the level of activity.

Part of the $1.5 million in the West Coast. We have three buildings there, two in a 150-square-foot range and one in a 324,000-square-foot range in East IE. Good product, great product with very, very good functionality. having tours and proposals for every building, but nothing, no lease to announce yet. And then the remaining in the West would be, under the West region, it will be 120,000 square foot in Chicago. Like East IE, we've been getting tours and we're responding to requests for proposals,

but don't have a lease to announce yet. Okay. And then can you just clarify the two-cent impact you had mentioned prior, like if you don't do any of the 1.6, is that still, the two cents is still in the guide or have you pushed that out? And then, and sorry, if you could just clarify that new 500,000 square foot lease, that was not part of the original 1.6. Well, with the good news

is with the benefit of that lease that Peter just announced in the call, coupled with, you know, the lease that we didn't first loop earlier than what we projected, Vikram, that two cents a share is now zero cents a share so what does that mean the 1.5 million square feet of development leasing that we still have in our guide and I'll also throw in the seven hundred eight thousand square footer in central Pennsylvania now effectively they're a heavy 1231 lease up so they're assumed to be leased up on

1231 great thank you and the next question comes from Nick Thillman with Baird. Please go ahead.

Following up maybe on that Camelback and the lease up there, is the plan there to kind of take that out like you did similar in 1Q?

The plan there is to, like every time, is to maximize value. We have a couple of executions. We can take it to market. We can acquire the product. We can look at holding it. I think all about the sensor again, about maximizing value. Also, very pleased about that execution because that JV project delivered returns exceeding our expectations. I also want to remind you there's another 71 acres left with great land, freeway frontage, and that we're focused on, again, maximizing value there, either developing it, either doing a higher and better use deal like we've done before and all of that.

And maybe dovetailing on that, just on you guys have outlined maybe the potential opportunity for monetizing some of the land bank or existing portfolio for data centers. I guess, is there any update there or the size or scope of what that opportunity set is?

Not really. That's a pretty big project. It's going to take some time. We have to look into power, of course, without that. You really don't have much to talk about. and these things, they're going to take several months to get to the answers on some of this.

That's it for me. Thank you.

And your next question comes from Craig Mailman with Citi. Please go ahead.

Hey, good morning. Peter, maybe can you just give some context around the 501,000 square foot lease? Was that a longer kind of burn on the demand there? Is that more recent? just to give us a sense of, you know, how quickly some of these can come together, you know, having some bigger ones like First Aurora left to take care of.

Yeah, sure. That was on the shorter end of the spectrum.

Jojo, you want to talk about that? Sure, sure. Basically, the building was just completed. So basically the building was leased at completion. Craig, we had a number of showings. As you may recall, too, that building has been 48% leased. So we've leased already basically half the building. And then so we had continuous showings and remaining vacancy. And we actually had three interested parties in this party wanted to really, they needed to grow and they wanted to control the space pretty quick. Tell them how long from beginning to now that discussion. The discussion, I would say, would be about 45 days.

And when does that one commence?

Right now. Yeah, today.

Right now. Oh, immediately. Yes, immediately. Okay. And then just, I guess more broadly, Peter, you're kind of showing that there's some improvement in demand, but it doesn't sound like you guys are getting excited about it yet, but at the same time there can be some big deals that can come quickly. I'm just kind of curious, as you guys are talking to people at some of these developments, like First Aurora has been one that's been vacant for two years. Are some of these, I don't want to call them stubborn vacancies, but kind of longer-tailed lease-ups, are these, in your opinion, like, is it a leasing strategy issue? Is it a product issue, or is it just a market issue? that you guys are contending with on some of these that are taking a little bit longer to lease up?

It's a demand-side issue. It's finding the right fit at the right time for the particular candidate or potential tenant. You know, people make decisions. This particular tenant that took the Phoenix property or the other half of the Phoenix property made some business decisions that caused them to need it pretty quickly. It's really just finding the right fit, Greg, and having the right size space at the right time. And so, you know, we've had, as you point out, in Denver, several tenants come by there and actually have traded proposals with several tenants. Look, there's definitely pent-up demand. There's frustration to some degree. The tariff thing has really caused people to pause. And yet there are also other tenants who are less tariff sensitive who are going to do deals. and that would, in fact, include the one that signed the lease in Phoenix.

Great. Thank you.

And your next question comes from Blaine Heck with Wells Fargo. Please go ahead.

Great. Thanks. Good morning. So one of your competitors mentioned that their build-to-suit pipeline is very strong. I guess, are you seeing demand on that side as well? What's your general appetite for build-to-suits, and how do those returns compare with what you might be able to generate through spec development?

Yeah, the returns are always going to be a little bit lower unless there's a special circumstance. We do execute on build-to-suits. You've seen us do that, but it's also not ever been a very high-volume component of our business. our platform is set up and our land holdings are such that we're more targeted to the speculative development business but we do like the build-to-suit business depending on what we can earn and obviously we're trying to maximize returns for shareholders so we're going to evaluate the kinds of returns we can earn on a build-to-suit relative to the risk in taking on a speculative project risk and return of taking on a speculative project

great that's helpful And then maybe a little bit more high level, it seems as though there are a few different strategies we're seeing from tenants. Those that are continuing on with their business plans and leasing despite the uncertainty, you've got those that are strategizing more but still in the market but taking a little bit longer to make decisions, and those that are completely on pause and waiting for clarity. I guess would you agree with that characterization and how would you kind of characterize the relative size of each of those groups today in your markets?

We've had some conversations. We're close to, you know, trading paper, and they've said, gee, we want your building, but we've just got word from HQ that we have to pause now. And that was, you know, post-April 2nd. So there's definitely a large group there. There is definitely a large group who window shop because they know they need space. They're just not sure when. And then there are the ones who are a bit more bold, and some of them who say, hey, we see what Amazon is doing, spending $15 billion, or at least they're announcing to spend $15 billion on new centers, largely in rural areas, and they're going to build out their same-day delivery from the city to the suburbs to the rural areas, and they can't afford to sit and watch, so they're going to go ahead and sign leases. So I think you outlined it pretty well. You've got tenants kind of active across the spectrum in terms of objectives.

And do you think those different strategies are roughly equal in size, or would you say, you know, one or another are more prominent here?

Hard to say.

Okay. Fair enough. Thank you, guys.

And your next question comes from Caitlin Burroughs with Goldman Sachs. Please go ahead.

Hi, good morning. I think you historically mentioned the answer was that it doesn't, but to what extent have you found that reducing price can create more leasing demand, whether it's developments or other vacancies? Have you seen this work in some places, but not others?

You know, Caitlin, we really – first of all, we focus on the NPV of that discussion, if you want to call it that. There are lots of different inputs, certainly RAISE is one, TIs, free rent, and move-in dates. Some people want to sign leases and not move in for six or eight months. So there's a lot of variable there. Lowering the rate doesn't create new demand, and it's really, you know, then you subject yourself to a big hit to that NPV model, and so that's always the thing you try to hold steady on is rate.

Got it. Okay, and then just on the decision to issue the unsecured bonds, I was wondering if you guys could go through, I don't think you had talked about it before, but maybe you had, but kind of like what drove that? Is it based on your size today, efficiency of the market, that you're not doing dispositions, or like what was different now versus the last 18 or so years?

Sure, Caitlin. Scott, I think we saw that we had a path to be a serial issuer in the public bond market. We've got maturities coming up the next five years. And if you look over the majority of the years in the last 20 years, the pricing in the public bond market is inside of this pricing in the private placement market from a spread point of view. So that was the rationale for doing it. As far as the home for the offering, we had about $500 million on our line of credit. So we utilized the proceeds to pay down our line.

Got it. And just in terms of, like, what was different now versus, like, four years ago or something, to not do it then? Any comments on that?

Well, now, if you look at our maturity schedule over the next five years, we've got enough maturities to be somewhat of a serial issuer in the public bond market, which is what the investor base wants to see. And four years ago, we just didn't, you know, if we did something then, we might not have been back to the market for a couple of years. and the public bond investors like you to be back on a more reoccurring basis.

And the size of the offering back four years ago was smaller than it is today. It wasn't benchmark size. And in some cases, the private placement market was cheaper, actually, than the public market.

$17 and $18.

Got it. Okay, thanks.

And your next question comes from Jessica Zhang with Green Street. Please go ahead.

Good morning. I was wondering if you have any insights around how private industrial developers are behaving in the current environment. I just wonder for, you know, the firms that are sitting on let spec developments, are they, you know, start to offer elevated concession packages, or are they materially cutting safe rents to try to secure a tenant?

Peter and Joje, you guys want to talk about what you're saying?

Sure. I would say, generally speaking, where there are more choices, you've seen concessions drift up because tenants have a lot of choices. So developers are responding in that way. But I wouldn't say there's a material difference across the landscape for developers. Jojo?

Yes, I would agree. And then in terms of starts, they're cautious, hard to get debt. debt is expensive, and a lot of developers are sitting on their land because they've got still some vacancies on their new developments.

Thank you.

And your next question comes from Nick Yulico with Scotiabank. Please go ahead.

Hello, this is Victor Patti on with Nick Yulico. Now that the focus is shifted to addressing 26-27 expirations, we see that expiring rents are rather on the lower end for 26 and 27 as well. Are those assets indicative and comparable to the types of assets you leased in 2025? Just trying to understand here the demand and potential rent spread for those properties.

So asking about 26 to 27 expirations and how the rent stack up.

Well, so 26 compared to 25, I would say pretty consistent. but in 26, we do have a higher proportion of expirations in Dallas and Atlanta, which have been very good markets over the last several years. So I would say that's pretty much the difference between 26 and 25. 27, I don't know right offhand. I can get back to you after the call.

Got it. Thank you. And then a quick follow-up on your current development leasing. Any types of tenants that you might highlight that are having a kind of higher interest in your assets at this point or there is no kind of particular trend you can highlight?

I would say generally we're seeing a lot of activity from food and beverage and 3PLs, some automotives, some manufacturing, some consumer products. E-commerce continues to be very busy. As Peter mentioned a couple of minutes ago, Amazon in particular has a range of requirements in a number of markets. They're very, very active. So activity overall continues to be pretty broad-based. We're pleased with the breadth of that.

Got it.

Again, if you have a question, please press star, then 1. And your next question comes from Brendan Lynch with Barclays. Please go ahead.

Thanks for taking my questions. You mentioned the interest rate drag on FFO in the back half. Can you also discuss the drag on same store that's implied in guidance for the second half as well?

Yeah, if you look at the same store, you know, kind of the second half, it's primarily due to, you know, lower average occupancy in the second half of the year compared to the first half of the year. You know, a little bit less contribution of the cash rental rate increases,

and then we have some, I assume, you know, increased pre-rent concessions on new leasing.

So that's really what's driving that a little bit lower in the second half of the year.

Okay, thanks. That's helpful. And can you also discuss what dictates when you grant a fixed-rate renewal option for tenants? Where does that kind of fall in your list of priorities when negotiating a lease? And should we expect any more of these in the remainder of 25 or into 26?

It's not on page one of the list. Let's put it that way. Obviously, you'd rather not do that, but sometimes there is a benefit. That particular case, very large tent, very good credit, and it made sense for that deal.

And, Brendan, the timing of that, that was done in 2017 as part of a lease renewal at that point. So you should not take that as a reflection of market conditions in the current environment.

We do it rarely.

very early. Okay, very good. Thank you. And your next question comes from Todd Thomas with KeyBank Capital Markets. Please go ahead. Hi, thanks. First question, just from your

comments earlier around the Camelback lease, you mentioned that it replaced the lease-up assumptions on the 1.6 million square feet that you had in guidance, the two cents, and that you're now assuming a 1231 lease-up essentially. But two questions. Do you actually feel different or less confident in the timing of the lease up on that 1.6 million square foot bucket any different than you did last quarter and then you know I suspect this means that the 95 to 96 percent occupancy assumptions you know if you're pushing out some of that leasing that that should sort of be disregarded I guess to some extent as it pertains to 25 you know we can do the math but just wanted to ask about that also since this you know sort of hit after the release it sounds like

Scott, so for the, you know, the occupancy assumptions don't change, Todd, because both the $1.5 million, actually, and also that includes the $708,000, they're assumed at least up on $1231, so that impacts, positively impacts our four-quarter average on that. And I'm sorry, what was the other question you had? I think I took care of the last part first.

Whether or not you actually feel different at all around the timing of that 1.6 million square foot lease up, right, Camelback, you know, helps in the sense that, you know, you're kind of pushing back that assumption. But, you know, in terms of traffic and, you know, the leasing prospects that you're working on, do you, you know, feel any different than you did last quarter?

Well, look, we've got five and a half months left in the year. Traffic around those assets is decent. They happen to be, most of them happen to be assets, as someone earlier pointed out, that have been available for a while. So the risk of getting those done is not zero. So generally we felt that it was more reflective of the probability to push those to the end of the year.

Got it.

And your next question comes from Michael Moeller with J.P. Morgan. Please go ahead.

Yeah, hi. Two questions, and one's probably like a really dumb clarification question. But on the first one, was there anything to note out of the ordinary with either, you know, property operating expenses or recoveries this quarter? Because it just looks like the ratio, the expense ratios were kind of lighter compared to where they've been running and especially compared to last year and stuff.

Mike, it's Scott. I'll explain it this way. It has to do with our tenured policy related to equity-based compensation. If you remember in the first quarter, our G&A was a lot higher because of that tenured-based policy. What does that mean? Gap accounting requires us to expense immediately awards issued to folks that reach a certain point of age and have a certain point of service in accordance with our policy. You saw that it increased our G&A that quarter, it also increases our property expenses, because our people that manage our properties, their compensation is reflected down in that line item. So what happens is it causes a depressed margin in the first quarter, and then in the second, third, and fourth quarter, the margins are elevated. And if you were to look back in the first quarter of 2024 and compare it to the following quarters, that same dynamic happened. And my bet is if you look back further years that dynamic has happened. So I would say that's the cause of the differential in margins

between 1Q25 and 2Q25. Got it. Okay. Yeah. I just thought it was a little bit bigger even compared to last year, but maybe not in that context. And then the second one, and this is kind of the dumber question, when you talk about the development leasing, because in my mind, I think development, external growth, development pipeline, when I think of, same story, I think of occupancy, the in-service portfolio. How much of this, like, is all the million six development leasing you're talking about doing or the million five, is all that related to the in-service portfolio? So it just happens to be stuff that you developed at some point in time that is in there. So, you know, you can have development leasing that's impacting your occupancy guidance for the in-service portfolio, or is a portion of that kind of true development leasing where it's not in the in-service portfolio. It's just getting a little kind of confusing

from my standpoint. Mike, I mean, the way that we look at it, it relates to what's already in service. That's the $1.65 million. And if you want to walk through those projects after the call, I'd be willing, definitely be willing to do so. Now, life isn't perfect in development leasing, though. We saw that last year as well. There might be 300,000 square feet of projects that we've completed that aren't in service, that aren't in our guidance that we lease up this year that have a positive impact, that make up maybe for not leasing up some of the 1.5 million square feet. But what we have in guidance is in service. And again, I'd be glad to walk through the projects with you after the call if you'd

Got it. That helps. Appreciate it.

And your next question is a follow-up from Caitlin Burroughs with Goldman Sachs. Please go ahead.

Oh, hi again. And I feel like there hasn't been much talk about specific markets, so I figured I would follow up on it. Could you talk a little bit first about SoCal, how you saw it evolve during the quarter, maybe from a demand perspective, and on the rent side, and whether there are any differences to call out by submarkets?

Sure, Caitlin. Let's start with the rent. Rent, I would say, from Q1 to Q2, there was 5% decline in market rents. in terms of, but it's still, rents today are probably about 100% or double the pre-COVID rents. So that's the way you look at it. So if you look at it, it's about 13.5%, 14% CAGR. Now let's move on to activity. Gross leasing activity in Q2 was kind of comparable to Q1. Vacancy increased about 10 basis points in both IE West and IE East. IE West is a little bit lower vacancy rate, it's performing better than IE East. In terms of net absorption, it's somewhat flat because despite the positive gross leasing activity, there's been a little bit higher give back of space. Then moving on to the supply stats, deliveries and starts have been really low. Total deliveries is under 2 million, of which roughly about 35% is pre-leased. And starts are about 1.6 million under 2 million, of which 600 was a bill to sue. So now, you know, the stats I'm giving you is basically only IE core, because we don't invest in the high desert, i.e. north, which is less than 4% of the market. Anyway, I hope that helps in terms of rents and absorption and activity.

It does. Thanks. And then I guess as you think about the other markets you guys are in, are there any to call out as being strongest versus weakest today?

Peter Shultz, I would say Nashville continues to be among the strongest in the country. Little new supply, good demand, rents continue to go up. We've seen some increased activity in Florida recently. So all the markets are doing pretty well, but those would be two of the stronger.

Caitlin, I've just had certain submarkets in Dallas and Houston we like right now. They're doing well.

Thanks.

This concludes our question and answer session. I would like to turn the conference back over to Peter Basile for any closing remarks.

Thank you, Operator, and thanks to everyone for participating on our call today. If you have any follow-ups from our call, please reach out to Art, Scott, or me.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.