First Industrial Realty Trust (FR) Nareit REIT Week: 2024 Investor Conference summary

Leasing environment and tenant activity

• Renewal leasing remains strong, with tenants making decisions well ahead of lease expirations, reflecting business confidence.

• New tenant activity slowed in 2023 but improved late in the year as inflation concerns eased; decision-making is still cautious but better than most of 2023.

• Leasing activity varies by region: South Florida, Nashville, Central Valley PA, and Lehigh Valley are strong, while Southern California lags but shows some new requirements.

• 3PLs, e-commerce, food and beverage, and multi-channel retailers are active; home improvement sector demand has declined.

• Free rent concessions have increased slightly, but tenant improvements remain standard; rollovers see minimal concessions.

Market trends and rent dynamics

• Market rents are rising in some regions (South Florida, Nashville) but declining in Southern California, with LA down 5-7%, Inland Empire West down 10-12%, and East down 15-20%.

• Nationwide, positive rent growth is expected in 2024, roughly in line with inflation plus one point.

• Contractual escalators average 3.2% portfolio-wide, with 2024 rollovers at about 3.7%; more pushback is expected as inflation moderates.

Development, acquisitions, and capital position

• Potential to drive $34 million incremental cash flow by leasing up completed and in-process developments.

• Strong capital position with low leverage and no debt maturities until 2026; $120 million in development funding required this year is covered by cash flow and asset sales.

• Development starts are down 70%, with new projects likely in South Florida, especially at First Park Miami.

• Asset sales target $100-150 million in 2024, with strong interest from 1031 buyers and local investors, especially in Midwest markets.

• Acquisition opportunities are evaluated selectively, focusing on geographic and functional fit.