Q2 2026 First Industrial Realty Trust Inc Earnings Call

July 23, 2026

Speaker #1: Good day, and welcome to the First Industrial Realty Trust Q2 2026 results conference call. All participants will be in listen-only mode. Should you need assistance, please say a conference specialist by pressing the star key followed by zero.

Operator: Good day, and welcome to the First Industrial Realty Trust Q2 2026 Results Conference 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.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1, on a touchtone phone.

Operator: To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Art Harmon, Senior Vice President, Investor Relations and Marketing. Please go ahead.

Speaker #1: To withdraw your question, please press star, and then 2. Please note this event is being recorded. I would now like to turn the conference over to Art Harmon, Senior Vice President, Investor Relations and Marketing.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Dave. Hello, everyone, and welcome to our call. Before we discuss our Q2 2026 results and our updated guidance for 2026, please note that our call may include forward-looking statements as defined by Federal Securities Laws.

Art Harmon: Thank you, Dave. Hello, everyone, and welcome to our call. Before we discuss our Q2 2026 results and our updated guidance for 2026, 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, 23 July 2026. 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 10K and other SEC filings. You can find a reconciliation of non-GAAP financial measures discussed in today's call in our supplemental report and our earnings release. Supplemental report, earnings release, and our SEC filings are available at firstindustrial.com under the Investors tab.

Speaker #2: 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 23, 2026.

Art Harmon: Today's statements may be time sensitive and accurate only as of today's date, 23 July 2026. 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 10K and other SEC filings.

Speaker #2: 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 that could cause this are described in our 10-K and other SEC filings.

Speaker #2: You can find a reconciliation of non-GAAP financial measures discussed in today's call in our supplemental report and our earnings release. Supplemental report, earnings release, and our SEC filings are available at firstindustrial.com under the Investors tab.

Art Harmon: You can find a reconciliation of non-GAAP financial measures discussed in today's call in our supplemental report and our earnings release. Supplemental report, earnings release, and our SEC filings are available at firstindustrial.com under the Investors tab.

Speaker #2: Our call today will begin with remarks by Peter Baccile, our President and Chief Executive Officer, and Scott Musil, Chief Financial Officer, after which we'll open it up for your questions.

Art Harmon: Our call today will begin with remarks by Peter Baccile, our President and Chief Executive Officer, and Scott Musil, 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.

Speaker #2: 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.

Speaker #2: Now, let me hand the call over to Peter.

Speaker #3: Thank you, Art, and thank you all for joining us today. Our team delivered another excellent quarter, building upon the momentum that took shape in Q1.

Peter E. Baccile: Thank you, Art, thank you all for joining us today. Our team delivered another excellent quarter, building upon the momentum that took shape in Q1. Our confidence in leasing demand supporting new business growth has strengthened compared to earlier in the year and most certainly last year. We're seeing additional touring activity and enhanced decision making overall, including for larger format spaces. Our team delivered some significant leasing wins in the quarter, including a full building lease for our 708,000 square foot building in Central Pennsylvania, as well as for a few of our developments, which I'll detail shortly. On the strength of that leasing, we increased our FFO guidance midpoint by $0.02 per share. Scott will walk you through our guidance during his remarks.

Peter Baccile: Thank you, Art, thank you all for joining us today. Our team delivered another excellent quarter, building upon the momentum that took shape in Q1. Our confidence in leasing demand supporting new business growth has strengthened compared to earlier in the year and most certainly last year. We're seeing additional touring activity and enhanced decision making overall, including for larger format spaces.

Speaker #3: Our confidence in leasing demand, supporting new business growth, has strengthened compared to earlier in the year, and most certainly last year. We're seeing additional touring activity and enhanced decision-making overall, including for larger format spaces.

Speaker #3: Our team delivered some significant leasing wins in the quarter, including a full building lease, for our 708,000 square foot building in Central Pennsylvania, as well as for a few of our developments, which I'll detail shortly.

Peter Baccile: Our team delivered some significant leasing wins in the quarter, including a full building lease for our 708,000 square foot building in Central Pennsylvania, as well as for a few of our developments, which I'll detail shortly. On the strength of that leasing, we increased our FFO guidance midpoint by $0.02 per share. Scott will walk you through our guidance during his remarks.

Speaker #3: On the strength of that leasing, we increased our FFO guidance midpoint by $0.02 per share. Scott will walk you through our guidance during his remarks.

Speaker #3: Turning to the overall market, industry fundamentals are trending positively with respect to net absorption, while the pace of new deliveries continues to moderate as expected.

Peter E. Baccile: Turning to the overall market, industry fundamentals are trending positively with respect to net absorption, while the pace of new deliveries continues to moderate as expected. According to CBRE, the national vacancy improved by 20 basis points to 6.5% at the end of Q2. Net absorption was strong at 85 million square feet, nearly doubling Q1, significantly exceeding new deliveries of 48 million square feet. The national construction pipeline ticked up modestly to 252 million square feet, is still well pre-leased at 38%. Turning now to our portfolio performance. We ended the quarter with in-service occupancy of 94.9%, up 60 basis points from Q1, primarily driven by the 708,000 square foot PA lease. Regarding our 2026 rollovers, we've now taken care of 80% by square footage, our overall cash rental rate increase for new and renewal leasing for signed leases is 39%.

Peter Baccile: Turning to the overall market, industry fundamentals are trending positively with respect to net absorption, while the pace of new deliveries continues to moderate as expected. According to CBRE, the national vacancy improved by 20 basis points to 6.5% at the end of Q2. Net absorption was strong at 85 million square feet, nearly doubling Q1, significantly exceeding new deliveries of 48 million square feet.

Speaker #3: According to CBRE, the national vacancy improved by 20 basis points to 6.5% at the end of the second quarter. Net absorption was strong at 85 million square feet, nearly doubling Q1, and significantly exceeding new deliveries of 48 million square feet.

Speaker #3: The national construction pipeline ticked up modestly to 252 million square feet and is still well pre-leased at 38%. Turning now to our portfolio performance, we ended the quarter with in-service occupancy of 94.9%, up 60 basis points from the first quarter, primarily driven by the 708,000-square-foot PA lease.

Peter Baccile: The national construction pipeline ticked up modestly to 252 million square feet, is still well pre-leased at 38%. Turning now to our portfolio performance. We ended the quarter with in-service occupancy of 94.9%, up 60 basis points from Q1, primarily driven by the 708,000 square foot PA lease. Regarding our 2026 rollovers, we've now taken care of 80% by square footage, our overall cash rental rate increase for new and renewal leasing for signed leases is 39%.

Speaker #3: Regarding our 2026 rollovers, we've now taken care of 80% by square footage, and our overall cash run-rate increase for new and renewal leasing for signed leases is 39%.

Speaker #3: Our cash run rate guidance for 2026 commencements is 35% to 40%, which is an increase at the midpoint and a tightening of the range.

Peter E. Baccile: Our cash rental rate guidance for 2026 commencements is 35% to 40%, which is an increase at the midpoint and a tightening of the range. Moving now to development leasing. Since last quarter's call, we saw more broad-based success across several markets, inking an additional 433,000 square feet, bringing the total signings in the quarter to 643,000 square feet. First, we expanded our existing tenant into the remaining 31,000 square feet at First Pompano Logistics Center in South Florida. In Dallas, we signed a full building lease for the just completed 176,000 square footer at First Park 121 to a wire and cable supplier that supports the data center industry. Lastly, we fully leased our recently completed 226,000 square foot building at First Park New Castle in the Philadelphia market. With this full building lease, we're excited to announce the start of a second building in that park.

Peter Baccile: Our cash rental rate guidance for 2026 commencements is 35% to 40%, which is an increase at the midpoint and a tightening of the range. Moving now to development leasing. Since last quarter's call, we saw more broad-based success across several markets, inking an additional 433,000 square feet, bringing the total signings in the quarter to 643,000 square feet.

Speaker #3: Moving now to development leasing. Since last quarter's call, we saw more broad-based success across several markets, inking an additional 433,000 square feet bringing the total signings in the quarter to 643,000 square feet.

Speaker #3: First, we expanded our existing tenant into the remaining 31,000 square feet at First Pompano Logistics Center in South Florida. In Dallas, we signed a full building lease for the just-completed 176,000-square-footer at First Park 121 to a wire and cable supplier that supports the data center industry.

Peter Baccile: First, we expanded our existing tenant into the remaining 31,000 square feet at First Pompano Logistics Center in South Florida. In Dallas, we signed a full building lease for the just completed 176,000 square footer at First Park 121 to a wire and cable supplier that supports the data center industry.

Speaker #3: Lastly, we fully leased our recently completed 226,000 square foot building at First Park Newcastle in the Philadelphia market. With this full building lease, we're excited to announce the start of a second building in that park, the 613,000 square foot facility can accommodate up to 4 tenants with an estimated investment of $77,00,00 and an estimated cash yield north of 8%.

Peter Baccile: Lastly, we fully leased our recently completed 226,000 square foot building at First Park New Castle in the Philadelphia market. With this full building lease, we're excited to announce the start of a second building in that park.

Peter E. Baccile: The 613,000 square foot facility can accommodate up to four tenants, with an estimated investment of $77 million and an estimated cash yield north of 8%. Let me update you on our other investment and disposition activity since our last call. On the acquisition front, our regional team was successful in sourcing a recently completed development in the Great Southwest sub-market of Dallas. The 161,000 square foot facility is 50% leased, giving us the opportunity to add value through lease up. The purchase price was $26 million with a targeted cash yield of approximately 6%. We also acquired a 58-acre infill development site in the middle of the BW corridor, the largest sub-market in Baltimore, for $39 million. The site is designed to accommodate three buildings totaling 629,000 square feet upon full entitlement and completion of infrastructure work.

Peter Baccile: The 613,000 square foot facility can accommodate up to four tenants, with an estimated investment of $77 million and an estimated cash yield north of 8%. Let me update you on our other investment and disposition activity since our last call. On the acquisition front, our regional team was successful in sourcing a recently completed development in the Great Southwest sub-market of Dallas.

Speaker #3: Now, let me update you on our other investment and disposition activities since our last call. On the acquisition front, our regional team was successful in sourcing a recently completed development in the Great Southwest submarket of Dallas.

Speaker #3: The 161,000-square-foot facility is 50% leased, giving us the opportunity to add value through lease-up. The purchase price was $26 million, with a targeted cash yield of approximately 6%.

Peter Baccile: The 161,000 square foot facility is 50% leased, giving us the opportunity to add value through lease up. The purchase price was $26 million with a targeted cash yield of approximately 6%. We also acquired a 58-acre infill development site in the middle of the BW corridor, the largest sub-market in Baltimore, for $39 million. The site is designed to accommodate three buildings totaling 629,000 square feet upon full entitlement and completion of infrastructure work.

Speaker #3: We also acquired a 58-acre infill development site in the middle of the BW corridor—the largest submarket in Baltimore—for $39 million. The site is designed to accommodate three buildings totaling 629,000 square feet, upon full entitlement and completion of infrastructure work.

Speaker #3: Regarding sales, as expected, we successfully closed on the $131 million land sale in Phoenix. Pricing was $30 per land square foot, just shy of three times industrial land values in that market.

Peter E. Baccile: Regarding sales, as expected, we successfully closed on the $131 million land sale in Phoenix. Pricing was $30 per land square foot, just shy of three times industrial land values in that market. We also sold four buildings in Detroit totaling 310,000 square feet for a total of $29 million. We have just one 16,000 square foot building remaining in that market. Before I turn it over to Scott, I'd like to thank everyone that invested the time to participate in the two property tours we recently hosted in Southern California and New Jersey. I know that you came away with a greater appreciation of our portfolio quality, value creation ability, and the expertise of our regional leadership. With that, I'll turn it over to Scott.

Peter Baccile: Regarding sales, as expected, we successfully closed on the $131 million land sale in Phoenix. Pricing was $30 per land square foot, just shy of three times industrial land values in that market. We also sold four buildings in Detroit totaling 310,000 square feet for a total of $29 million. We have just one 16,000 square foot building remaining in that market.

Speaker #3: We also sold 4 buildings in Detroit totaling 310,000 square feet for a total of 29 million. We have just 1 16,000 square foot building remaining in that market.

Speaker #3: Before I turn it over to Scott, I'd like to thank everyone that invested the time to participate in the two property tours we recently hosted in Southern California and New Jersey.

Peter Baccile: Before I turn it over to Scott, I'd like to thank everyone that invested the time to participate in the two property tours we recently hosted in Southern California and New Jersey. I know that you came away with a greater appreciation of our portfolio quality, value creation ability, and the expertise of our regional leadership. With that, I'll turn it over to Scott.

Speaker #3: I know that you came away with a greater appreciation of our portfolio quality, value creation ability, and the expertise of our regional leadership. With that, I'll turn it over to Scott.

Speaker #2: Thank you, Peter. Let me recap our results for the second quarter. Neighborhood funds from operations were 82 cents per fully diluted share versus 76 cents a year ago.

Scott Musil: Thank you, Peter. Let me recap our results for the Q2. NAREIT funds from operations were $0.82 per fully diluted share versus $0.76 a year ago. Our cash same store rent growth for the quarter, excluding termination fees, was 6.7%. The results in the quarter were primarily driven by increases in rental rates on new and renewal leasing, contractual rent bumps, and lower free rent, partially offset by lower average occupancy. Summarizing our leasing activity during the Q2, approximately 2.6 million square feet of leases commenced. Of these, 1.1 million were new, 1 million were renewals, and 500,000 were for developments and acquisitions with lease up. We wanted to share with you a positive update related to tenant credit. Debenhams, formerly boohoo, signed a full building sublease for our 1.1 million square footer in Pennsylvania.

Speaker #2: Our cash same-store NOI growth for the quarter, excluding termination fees, was 6.7%. The results in the quarter were primarily driven by increases in rental rates on new and renewal leasing, contractual rent bumps, and lower free rent, partially offset by lower average occupancy.

Speaker #2: Summarizing our leasing activity during the second quarter, approximately 2.6 million square feet of leases commenced. Of these, 1.1 million were new, 1 million were renewals, and 500,000 were for developments and acquisitions with lease-up.

Scott Musil: Summarizing our leasing activity during the Q2, approximately 2.6 million square feet of leases commenced. Of these, 1.1 million were new, 1 million were renewals, and 500,000 were for developments and acquisitions with lease up. We wanted to share with you a positive update related to tenant credit. Debenhams, formerly boohoo, signed a full building sublease for our 1.1 million square footer in Pennsylvania.

Speaker #2: Also, we wanted to share with you a positive update related to tenant credit. Debenhams, formerly Boohoo, signed a full building sublease for our 1.1 million-square-footer in Pennsylvania.

Speaker #2: The subtenant is a 3PL that was already at the value of an FR tenant, so we are very pleased with this outcome. Now, moving on to our guidance.

Scott Musil: The subtenant is a 3PL that was already a value-add for our tenants, we are very pleased with this outcome. Moving on to our guidance. As Peter noted, we increased our FFO midpoint guidance by $0.02 per share and narrowed our guidance range for 2026 NAREIT FFO to $3.08 to $3.16 per share. Recall that NAREIT FFO reflects $0.04 per share of advisory costs related to the contested proxy campaign incurred in the Q1. Excluding these advisory costs, our 2026 FFO guidance range is $3.12 to $3.20 per share, which is also a $0.02 increase at the midpoint. Our other major guidance assumptions are as follows. Average quarter end in-service occupancy of 94% to 95%. This range reflects approximately 900,000 square feet of incremental development leasing out of an opportunity set of 1.7 million square feet.

Speaker #2: As Peter noted, we increased our FFO midpoint guidance by 2 cents per share and narrowed our guidance range for 2026 neighborhood FFO to $3.08 to $3.16 per share.

Speaker #2: Recall that neighborhood FFO reflects 4 cents per share of advisory costs related to the contested proxy campaign incurred in the first quarter. Excluding these advisory costs, our 2026 FFO guidance range is $3.12 to $3.20 per share, which is also a 2 cent increase at the midpoint.

Scott Musil: Excluding these advisory costs, our 2026 FFO guidance range is $3.12 to $3.20 per share, which is also a $0.02 increase at the midpoint. Our other major guidance assumptions are as follows. Average quarter end in-service occupancy of 94% to 95%. This range reflects approximately 900,000 square feet of incremental development leasing out of an opportunity set of 1.7 million square feet.

Speaker #2: Our other major guidance assumptions are as follows. Average quarter-end in-service occupancy of 94 to 95 percent. This range reflects approximately 900,000 square feet of incremental development leasing out of an opportunity set of 1.7 million square feet.

Speaker #2: The development leasing is assumed to occur primarily in the fourth quarter. In terms of cadence, guidance assumes in-service occupancy to dip to around 93.5 percent at the end of 3Q.

Scott Musil: The development leasing is assumed to occur primarily in Q4. In terms of cadence, guidance assumes in-service occupancy to dip to around 93.5% at the end of Q3. We expect to end the year at around 95.5% due to the assumed development leasing plus other core portfolio leasing. Cash same store NOI growth before termination fees of 5.25% to 6.25%, an increase of 25 basis points at the midpoint. Guidance includes the anticipated 2026 costs related to our completed and under construction developments and today's announced start. For the full year 2026, we expect to capitalize about $0.08 per share of interest. Our G&A expense guidance range is $42 to $43 million, which excludes the $5.6 million of costs related to the contested proxy campaign. Let me turn it back over to Peter.

Speaker #2: We expect to end the year at around 95.5 percent due to the assumed development leasing plus other core portfolio leasing. Cash seems to run a wide growth before termination fees of 5.25 percent to 6.25 percent, an increase of 25 basis points at the midpoint.

Speaker #2: Guidance includes the anticipated 2026 costs related to our completed and under-construction developments and today's announced start. For the full year 2026, we expect to capitalize about $0.08 per share of interest.

Scott Musil: Guidance includes the anticipated 2026 costs related to our completed and under construction developments and today's announced start. For the full year 2026, we expect to capitalize about $0.08 per share of interest. Our G&A expense guidance range is $42 to $43 million, which excludes the $5.6 million of costs related to the contested proxy campaign. Let me turn it back over to Peter.

Speaker #2: Our G&A expense guidance range is $42 million to $43 million, which excludes the $5.6 million of costs related to the contested proxy campaign.

Speaker #2: Let me turn it back over to Peter.

Speaker #3: Thank you to all of my teammates at First Industrial for your outstanding efforts this quarter. We continue to be optimistic about the activity levels we're seeing within our development and portfolio availabilities, across markets and size ranges.

Peter E. Baccile: Thank you to all of my teammates at First Industrial for your outstanding efforts this quarter. We continue to be optimistic about the activity levels we're seeing within our development and portfolio availabilities across markets and size ranges. We're excited about our new investment opportunities, and we maintain our focus on driving long-term cash flow and value for shareholders. Operator, we're ready to open up for questions.

Peter Baccile: Thank you to all of my teammates at First Industrial for your outstanding efforts this quarter. We continue to be optimistic about the activity levels we're seeing within our development and portfolio availabilities across markets and size ranges. We're excited about our new investment opportunities, and we maintain our focus on driving long-term cash flow and value for shareholders. Operator, we're ready to open up for questions.

Speaker #3: We're excited about our new investment opportunities, and we maintain our focus on driving long-term cash flow and value for shareholders. Operator, we're ready to open up for questions.

Speaker #1: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchstone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're 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 and then two. Also, please limit yourself to one question and one follow-up. The first question comes from Craig Mailman with Citi. Please go ahead.

Speaker #1: If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. Also, please limit yourself to one question and one follow-up.

Speaker #1: The first question comes from Craig Mailman with City. Please go ahead.

Speaker #4: Good morning. Peter, you know your commentary is pretty consistent with peers and brokers that things are getting better and decisions are being made quicker.

Craig Mailman: Good morning. Peter, your commentary is pretty consistent with peers and brokers that things are getting better and decisions are being made quicker. I'm just kind of curious, as we look from here, and you have discussions with tenants and you see what vacancies you have left in the portfolio. From a market condition standpoint, how real is, I don't want to call it FOMO, but just with some bigger boxes being taken off the market, you had success with boohoo, finding a sublease tenant. You got 708 done in Central PA. Some of the bigger availabilities are being taken off the market. How is this shaping the discussions you're having with tenants in terms of their mentality with less new supply coming on and the urgency they're getting? Should we expect to see this continue to accelerate into the back half of the year?

Speaker #4: I'm just kind of curious, as we look from here, and you have discussions with tenants and you see what vacancies you have left in the portfolio, from a market condition standpoint, how real is I don't want to call it FOMO, but just with some bigger boxes being taken off the market, you had success with Boohoo finding a sublease tenant, you've got 708 done in Central PA.

Craig Mailman: From a market condition standpoint, how real is, I don't want to call it FOMO, but just with some bigger boxes being taken off the market, you had success with boohoo, finding a sublease tenant. You got 708 done in Central PA. Some of the bigger availabilities are being taken off the market.

Speaker #4: Some of the larger availabilities are being taken off the market. How is this shaping the discussions you're having with tenants, in terms of their mentality with less new supply coming on and the urgency they're feeling?

Craig Mailman: How is this shaping the discussions you're having with tenants in terms of their mentality with less new supply coming on and the urgency they're getting? Should we expect to see this continue to accelerate into the H2 of the year? There's something that we're missing in terms of other dynamics in the market? Can you just kind of give us your thoughts on how this could play out over the next two to three quarters?

Speaker #4: Should we expect to see this continue to accelerate into the back half of the year, or are there something that we're missing in terms of other dynamics in the market?

Craig Mailman: There's something that we're missing in terms of other dynamics in the market? Can you just kind of give us your thoughts on how this could play out over the next two to three quarters?

Speaker #4: Can you just kind of give us your thoughts on how this could play out as over the next 2 to 3 quarters?

Speaker #3: Sure. I'll start out, and then Jojo and Peter can weigh in. Net absorption is up pretty significantly. That has a lot to do with the fact that we've got a lot more activity with the bigger spaces now.

Peter E. Baccile: Sure. I'll start out and then Jojo and Peter can weigh in. Net absorption's up pretty significantly. That has a lot to do with the fact that we've got a lot more activity with the bigger spaces now. 700,000 to 1.2 million, that activity is up 127%. North of 1.2 million, that's up 117%. You definitely have a scarcity value at the bigger spaces now. Activity's up also across the other size ranges, but a little less. There are a little bit more alternatives that have yet to be taken up in the smaller size ranges. The activity and the interest in investing in growth has definitely changed from a year ago. Jojo, you want to add anything?

Peter Baccile: Sure. I'll start out and then Jojo and Peter can weigh in. Net absorption's up pretty significantly. That has a lot to do with the fact that we've got a lot more activity with the bigger spaces now. 700,000 to 1.2 million, that activity is up 127%. North of 1.2 million, that's up 117%. You definitely have a scarcity value at the bigger spaces now.

Speaker #3: So, 700,000 to a million two—activity is up 127 percent. North of a million two, that's up 117 percent. So you definitely have a scarcity value at the bigger spaces now.

Speaker #3: Activity is up also across the other size ranges, but a little less. They're a little bit more alternatives that have yet to be taken up in the smaller size ranges.

Peter Baccile: Activity's up also across the other size ranges, but a little less. There are a little bit more alternatives that have yet to be taken up in the smaller size ranges. The activity and the interest in investing in growth has definitely changed from a year ago. Jojo, you want to add anything?

Speaker #3: But the activity and the interest in investing and growth is definitely changed from a year ago. Jojo, you want to add anything?

Speaker #2: Yeah. I mean, what Peter just mentioned is that dynamic is absolutely what's going on in the West markets, including Chicago and Dallas, the largest spaces. As they decrease, tenants have fewer choices.

Johannson Yap: Yes. Just what Peter just mentioned is that dynamic is absolutely what's going on in the west markets, including Chicago and Dallas. The largest spaces as they decrease, tenants have fewer choices and they have to make decisions quicker. That's definitely happening. In the mid-size ranges, there are still available product for tenants to choose. It's been a little bit more better than Q1, but not as robust as larger spaces. That's across the country.

Speaker #2: And they have to make decisions quicker. So that's definitely happening. In the mid-size ranges, there are still available products for tenants to choose. So I mean, it's been a little bit more better than Q1, but not as robust as larger spaces.

Speaker #2: That's across the country.

Speaker #3: And then by category, you look at 3PLs, that activity—they've been leading market share now for a while. That activity, year over year, is up 18%.

Peter E. Baccile: By category, you look at 3PL, that activity, they've been leading market share now for a while. That activity year over year is up 18%. Manufacturing, food and bev, auto, all up 25-plus%. It's not only across spaces but across categories that the activity's picked up.

Peter Baccile: By category, you look at 3PL, that activity, they've been leading market share now for a while. That activity year over year is up 18%. Manufacturing, food and bev, auto, all up 25-plus%. It's not only across spaces but across categories that the activity's picked up.

Speaker #3: Manufacturing, food and bev, auto—all up 25-plus percent. So it's not only across spaces, but across categories, that the activity has picked up.

Speaker #2: And just one slight thing to add. I mean, if you look at the activity of, for example, Amazon, that has picked up as well.

Johannson Yap: Just one slight thing to add. If you look at the activity of, for example, Amazon, that has picked up as well. They've taken larger lot spaces. We have incremental additional demand that's happening over the past year or so from a data center related aerospace and defense. That also has added to the demand, and a lot of them have taken larger spaces as well.

Speaker #2: So they've taken a larger lot of spaces. And then we have incremental additional demand that's happening over the past year. So from a data center-related, aerospace, and defense.

Speaker #2: And that's also has added to the demand. And a lot of them have taken larger spaces as well.

Speaker #4: Hey, Craig, it's Peter. Just to add to Jojo and Peter's comment, to give you some color on the Boohoo outcome and our 708 in Pennsylvania, we had multiple prospects for both of those spaces.

Peter Schultz: Hey, Craig, it's Peter. Just to add to Jojo and Peter's comment, to give you some color on the boohoo outcome and our 708 Pennsylvania. We had multiple prospects for both of those spaces. Clearly there has been a pickup in the larger format as you commented, and much fewer choices, but also the development lease that we signed in the Philadelphia suburbs at our First Park New Castle for 226. Just echoing the broad-based level of activity, but activity has certainly picked up on the bigger spaces where it's been a little thin up until recently.

Peter Schultz: Craig, it's Peter. Just to add to Jojo and Peter's comment, to give you some color on the boohoo outcome and our 708 Pennsylvania. We had multiple prospects for both of those spaces. Clearly there has been a pickup in the larger format as you commented, and much fewer choices, but also the development lease that we signed in the Philadelphia suburbs at our First Park New Castle for 226. Just echoing the broad-based level of activity, but activity has certainly picked up on the bigger spaces where it's been a little thin up until recently.

Speaker #4: So clearly, there has been a pickup in the larger format, as you commented. And much fewer choices but also the development lease that we signed in the Philadelphia suburbs at our first-park Newcastle for 226.

Speaker #4: So just echoing the broad-based level of activity, but activity has certainly picked up on the bigger spaces where it's been a little thin up until recently.

Speaker #1: That's helpful color.

Craig Mailman: That's helpful color. I guess, maybe a quick two-parter to stay under the two-question limit. How does this kind of translate into what you guys have in terms of demand at First Aurora? Also, just what are your updated views on SoCal? Where do you kind of fall on the debate there, where we are in that recovery cycle?

Craig Mailman: That's helpful color. Maybe a quick two-parter to stay under the two-question limit. How does this kind of translate into what you guys have in terms of demand at First Aurora? Also, just what are your updated views on SoCal? Where do you kind of fall on the debate there, where we are in that recovery cycle?

Speaker #4: I guess maybe a quick two-parter to stay under the two-question limit. But how does this kind of translate into what you guys have in terms of demand at First Aurora?

Speaker #4: And then also, just what are your updated views on SoCal? Where do you kind of fall in the debate there—where we are in that recovery cycle?

Speaker #4: Let me take Aurora and then Jojo can comment on SoCal. So we continue to have activity at the building for partial and full building users.

Peter Schultz: Yeah, let me take Aurora, Jojo can comment on SoCal. We continue to have activity at the building for partial and full building users. We have a couple of new prospects since our last call. There's been no real change in the competitive set. What we really need are for some tenants to make decisions. Those that are in the market looking for more space, they need to decide if they're going to take more space or not. It's not a lack of prospects. We just want to see more definitive decision making. Jojo.

Speaker #4: We have a couple of new prospects since our last call. There’s been no real change in the competitive set. What we really need are for some tenants to make decisions—those that are in the market looking for more space, they need to decide if they’re going to take more space or not.

Speaker #4: But it's not a lack of prospects. We just want to see more definitive decision-making. Jojo?

Speaker #2: Craig, in terms of statistics for SoCal, if you look at Q2 compared to Q1 or earlier this year, it points to a market that's off the bottom.

Johannson Yap: Craig, in terms of statistics for SoCal, if you look at Q2 compared to Q1 or earlier this year, it points to a market that's off the bottom and it's in the start of a recovery. The reason is that if you look at growth absorption and net absorption, it significantly exceeded the deliveries. If you look at starts in our construction Other construction, it's still at historic lows, and if you actually compare to the base, it's de minimis. Also rents are just kind of flat. When you're looking at that, it definitely did better than what we expected. Yeah. That's what's going on with SoCal.

Speaker #2: And it's in the start of a recovery. And the reason is that if you look at the growth absorption and net absorption, it's significantly exceeded the deliveries.

Speaker #2: If you look at the starts in our construction under construction, it's still at storry close. And if you actually compare to the base, it's de minimis.

Johannson Yap: If you look at starts in our construction Other construction, it's still at historic lows, and if you actually compare to the base, it's de minimis. Also rents are just kind of flat. When you're looking at that, it definitely did better than what we expected. Yeah. That's what's going on with SoCal.

Speaker #2: And also, rents are just kind of just like flat. And so when you're looking at that, it definitely did better than what we expected.

Speaker #2: So yeah. So that's what's going on with SoCal.

Speaker #1: Great. Thank you, guys.

Vikram Malhotra: Great. Thank you, guys.

Craig Mailman: Great. Thank you, guys.

Speaker #3: Great.

Scott Musil: Great.

Johannson Yap: Great.

Speaker #1: And the next question comes from Nick Thelman with Baird. Please go ahead.

Operator: The next question comes from Nick Thillman with Baird. Please go ahead.

Speaker #4: Hey, good morning, guys. Scott, maybe just wanted to comment a little bit on the occupancy guide and just timing. If there was any shift when it comes to just the assets from the lease-up standpoint, it seems as though you're somewhat running ahead.

Nick Thillman: Hey, good morning, guys. Scott, maybe just wanted to comment a little bit on the occupancy guide and just timing, if there was any shift when it comes to just the assets from the lease-up standpoint. It seems as though you're somewhat running ahead, and you guys did message H2 for some of the leasing. I'm guessing it's more so to do with just some of the larger boxes that you have available and actually getting occupancy. Just wanted to clarify that first.

Nick Thillman: Good morning, guys. Scott, maybe just wanted to comment a little bit on the occupancy guide and just timing, if there was any shift when it comes to just the assets from the lease-up standpoint. It seems as though you're somewhat running ahead, and you guys did message H2 for some of the leasing. I'm guessing it's more so to do with just some of the larger boxes that you have available and actually getting occupancy. Just wanted to clarify that first.

Speaker #4: You guys did message second half for some of the leasing. I'm guessing it's more so to do with some of the larger boxes that you have available and actually getting occupancy.

Speaker #4: But just wanted to clarify that first.

Speaker #3: Yes. Well, I'll go into the development leasing first. So, the 900,000 square feet is basically the pure math. You take the 1.7 million square feet we discussed in our fourth quarter call, and you deduct what we've signed to date.

Scott Musil: I'll go into the development leasing first. The 900,000 square feet is basically the pure math. You take the 1.7 million square feet we discussed in our Q4 call, you deduct what we signed to date. That number hasn't changed. It's gone down. We did make some adjustments to some of the development leasing. It's all in Q4 now. If we do not sign any of those leases, the FFO impact is a lot less than it was, say, last time that we had a call. It's only about $0.01 per share. Nick, we made some other slight adjustments to some of our other core portfolio leasing assumptions, in a variety of our markets.

Speaker #3: So that number hasn't changed. It's gone down. We did make some adjustments to some of the development leasing. It's all in the fourth quarter now.

Speaker #3: And if we do not sign any of those leases, the FFO impact is a lot less than it was, say, last time that we had a call.

Scott Musil: If we do not sign any of those leases, the FFO impact is a lot less than it was, say, last time that we had a call. It's only about $0.01 per share. Nick, we made some other slight adjustments to some of our other core portfolio leasing assumptions, in a variety of our markets. I think the key thing to discuss here is, even with these adjustments, we are forecasting to end Q4 at an in-service occupancy rate of 95.5%.

Speaker #3: It's only about a penny per share. And then, Nick, we made some other slight adjustments to some of our other core portfolio leasing assumptions.

Speaker #3: In a variety of our markets, but I think the key thing to discuss here is, even with these adjustments, we are forecasting to end the fourth quarter at an in-service occupancy rate of 95.5 percent.

Scott Musil: I think the key thing to discuss here is, even with these adjustments, we are forecasting to end Q4 at an in-service occupancy rate of 95.5%.

Speaker #1: That's helpful. And then maybe curious on just the acquisition appetite with the Dallas acquisition and given the fact that where you kind of have the land bank today, there maybe is not as many opportunities as some of the markets where you've had some leasing success on development.

Nick Thillman: That's helpful. Maybe curious on just the acquisition appetite, with the Dallas acquisition and given the fact that where you kind of have the land bank today, there maybe is not as many opportunities as some of the markets where you've had some leasing success on development. Do you view that there's somewhat an opportunity here on some of the value add from the acquisition standpoint in markets like the Texas' and the Pennsylvanias of the world, where you have been seeing some great activity on the leasing side?

Speaker #1: So do you view that there is somewhat of an opportunity here on some of the value add from the acquisition standpoint in markets like the Texases and the Pennsylvania's of the world, where you have been seeing some great activity on the leasing side?

Nick Thillman: Do you view that there's somewhat an opportunity here on some of the value add from the acquisition standpoint in markets like the Texas' and the Pennsylvanias of the world, where you have been seeing some great activity on the leasing side?

Speaker #2: Jojo, thank you. Yeah. Yes. We're always acquisitions is always part of our business, our local teams are always scoring for good quality acquisitions. With a good yields.

Johannson Yap: You want to say more? Thank you. Yes. Acquisition is always part of our business. Our local teams are always scouring for good quality acquisitions with good yields. In this case, in Dallas, this was in Arlington, submarket of the great Southwest market of Dallas. Very infill, very active, this was a lightly marketed deal. We came in with certainty, we were able to acquire an asset, 50% leased, projected yield of 6%. We are an active investor. We've owned product in the great Southwest for some time, we really know that market. To your point, we're always looking for opportunities, I already said in Dallas, or you mentioned PA. We're going to continue to look for those. They have to meet our functional investment quality and yield criteria.

Speaker #2: In this case, in Dallas, this was in Arlington submarket of the Great Southwest market of Dallas. Very, very infilled. Very active. And this was a lightly marketed deal.

Speaker #2: We came in with certainty, and we were able to acquire an asset: 50 percent lease, projected yield of 6 percent. We are an active investor.

Johannson Yap: We came in with certainty, we were able to acquire an asset, 50% leased, projected yield of 6%. We are an active investor. We've owned product in the great Southwest for some time, we really know that market. To your point, we're always looking for opportunities, I already said in Dallas, or you mentioned PA. We're going to continue to look for those. They have to meet our functional investment quality and yield criteria.

Speaker #2: We've owned product in the Great Southwest for some time. So we really know that market. To your point at we're always looking for opportunities.

Speaker #2: I already said in Dallas, or you mentioned PA. Yeah. And so we're going to continue to look for those, but you have to meet our functional investment quality and yield criteria.

Speaker #1: And the next question comes from Dave Rogers with Raymond James. Please go ahead.

Operator: The next question comes from Dave Rogers with Raymond James. Please go ahead.

Speaker #3: Yeah. Good morning, everybody. Scott, one clarification on the Newcastle lease. Was that in the numbers you just talked about? I thought that was in the third quarter, so I didn't know if you were adding that in or not.

Dave Rogers: Yeah, good morning, everybody. Hey, Scott, one clarification on the Newcastle lease. Was that in the numbers you just talked about? I thought that was in Q3, so I didn't know if you were adding that in or not. Just a bigger picture question. You mentioned that you started Newcastle, kind of the next phase of that project. I guess, where else are you excited today about kind of putting money to work in H2 of the year as clearly you've leased up a good amount of your speculative space here in H1?

Dave Rogers: Yeah, good morning, everybody. Scott, one clarification on the Newcastle lease. Was that in the numbers you just talked about? I thought that was in Q3, so I didn't know if you were adding that in or not. Just a bigger picture question. You mentioned that you started Newcastle, kind of the next phase of that project. Where else are you excited today about kind of putting money to work in H2 of the year as clearly you've leased up a good amount of your speculative space here in H1?

Speaker #3: And then just a bigger picture question. You mentioned that you started Newcastle kind of the next phase of that project. I guess where else are you excited today about kind of putting money to work in the second half of the year as clearly you've leased up a good amount of your speculative space here in the first half?

Johannson Yap: Scott, you take the first.

Speaker #3: Yeah. So Dave, so first part Newcastle, the lease start date on that was in June. So it was the second quarter start. First part 121, that's a third quarter lease start date.

Scott Musil: Yeah. Dave, so First Park Newcastle, the lease start date on that was in June, so it was a Q2 start. First Park 121, that's a Q3 lease start date. We signed it in Q2, but it starts in August. That lease, even though it starts in Q3, is factored in our guidance, and that's how you get to the 900,000 square feet of remaining development leasing.

Speaker #3: We signed it in the second quarter, but it starts in August. So that lease, even though it starts in the third quarter, is factored in our guidance.

Speaker #3: And that's how you get to the 900,000 square feet of remaining development leasing.

Speaker #1: And Dave, for new starts, of course, our teams are actively pursuing new land acquisition opportunities like the one we just finished in the BW corridor.

Johannson Yap: Dave, for new starts, of course, our teams are actively pursuing new land acquisition opportunities, like the one we just finished in the BW corridor. With respect to perhaps more starts this year, we are evaluating opportunities in the portfolio in Pennsylvania and Florida, a smaller deal right here in Chicagoland. We'll keep you posted. Of course, just want to let's not forget the $70 million worth of projects. There are two projects, one in First Arlington. We call it First Arlington Commerce Center in Arlington, Texas, and our First Park Miami building. That's two projects totaling $70 million. That's not going to be completed until the end of this year and early next year. We're looking excited about those.

Speaker #1: And with respect to perhaps more starts this year, we are evaluating opportunities in the portfolio in Pennsylvania and Florida, as well as a smaller deal right here in Chicagoland.

Speaker #1: So we'll keep you posted.

Speaker #2: And of course, just want to and it's not forget the 70 million dollars worth of projects or sub-projects. One in First Arlington, we call it First Arlington Commerce Center in Arlington, Texas.

Johannson Yap: Of course, just want to let's not forget the $70 million worth of projects. There are two projects, one in First Arlington. We call it First Arlington Commerce Center in Arlington, Texas, and our First Park Miami building. That's two projects totaling $70 million. That's not going to be completed until the end of this year and early next year. We're looking excited about those.

Speaker #2: And our first part in Miami building, that's two projects totaling 70 million. That's not going to be completed until the end of this year.

Speaker #2: And early next year. We're looking excited about those.

Speaker #4: That's great. Thank you.

Dave Rogers: That's great. Thank you.

Speaker #1: And the next question comes from Vikram Malhotra with Mizuho. Please go ahead.

Operator: The next question comes from Vikram Malhotra with Mizuho. Please go ahead.

Speaker #4: Morning. Thanks for the questions. Maybe just first, I wanted to get to see if there's any update on sort of the potential sell more land or, I guess, data center conversion land.

Vikram Malhotra: Morning. Thanks for taking the questions. Maybe just first I wanted to see if there's any update on sort of the potential to sell more land or, I guess, data center conversion land, and how that pipeline may look. I think at NAREIT you had mentioned there were a couple of opportunities. That's just the first one. Then second, as we think about sort of any big renewals in the back half that may, I guess, make or break the top end of the guide, the same frequent call-out that may be sizable, whether it's in SoCal or any other markets. Thank you.

Speaker #4: And how that pipeline may look—I think at Nereid, you had mentioned there were a couple of opportunities. So that's just the first one.

Speaker #4: And then second, as we think about sort of any big renewals in the back half that may, I guess, make or break the top end of the guide, the same thing can call out that maybe Sizable, whether it's in SoCal or any other markets.

Speaker #4: Thank you.

Speaker #1: So, with respect to our efforts in the portfolio, and with respect to trying to convert to data center use, our teams continue to work on those projects.

Johannson Yap: With respect to our efforts in the portfolio, with respect to trying to convert to data center use, our teams continue to work on those projects. They're going to be long term. As I said at NAREIT, it's going to take a while. We are trying to pursue some power commitments. There's really nothing else to report there. Nothing will happen, i.e., close this year for sure. We'll keep you posted on that.

Speaker #1: They're going to be long-term, as I said at Nereid, it's going to take a while. We are trying to pursue some power commitments and there's really nothing else to report there.

Peter E. Baccile: Commitments. There's really nothing else to report there. Nothing will happen, i.e., close this year for sure. We'll keep you posted on that.

Speaker #1: Nothing will happen, i.e., close this year, for sure. But we'll keep you posted on that.

Speaker #3: And then on the renewal front, Vikram, we've taken care of 80% of the expirations for 2026, so we're taking care of the lion's share of it.

Scott Musil: On the renewal front, Vikram, we've taken care of 80% of the expirations for 2026. We're taking care of the lion's share of it. If you look at the budgeted renewals that we have in our guidance, there's none that are over 100,000 square feet. It's pretty granular.

Speaker #3: If you look at the budgeted renewals that we have in our guidance, there's none that are over 100,000 square feet. So it's a pretty granular.

Speaker #1: And the next question comes from Blaine Heck with Wells Fargo. Please go ahead.

Operator: The next question comes from Blaine Heck with Wells Fargo. Please go ahead.

Speaker #4: Great. Thanks. Good morning. So maybe just to add on to the questions on development, I guess, how are you thinking about the best time to deploy your 410 million roughly 410 of spec capital into development?

Blaine Heck: Great. Thanks. Good morning. Maybe just to add on to the questions on development. I guess, how are you thinking about the best time to deploy your $410 million, roughly $410 of spec capital into development? Is it now while some of the private players might still be on the sidelines given capital and land constraints? Or do you guys feel as if you have a solid window of time to kind of be patient without running into the problem of excess competitive supply once you do deliver these projects?

Speaker #4: Is it now, while some of the private players might still be on the sidelines given capital and land constraints? Or do you guys feel as if you have a solid window of time to kind of be patient without running into the problem of excess competitive supply once you do deliver these projects?

Speaker #2: Yeah. So that's with respect to the cap, that's a cap and not a target. We focus solely on profitability. And with respect to that, as we evaluate our land holdings and future land acquisitions, we're trying to deliver into the deepest part of the demand or unmet demand in a particular market.

Peter E. Baccile: Yeah. That's, with respect to the cap, that's a cap and not a target. We focus solely on profitability, and with respect to that, as we evaluate our land holdings and future land acquisitions, we're trying to deliver into the deepest part of the demand or unmet demand in a particular market. That's how we evaluate where we're going to go next. We also, as I think you probably know, don't really want to have too many projects in any one park going at the same time. I mean, First Park Miami, we could start a couple of more buildings there, but we want to get some leasing as we go. We don't sit here and say, "Do we need to use that $400 million?" We sit here and say, "Where is the demand?

Peter Baccile: Yeah. That's, with respect to the cap, that's a cap and not a target. We focus solely on profitability, and with respect to that, as we evaluate our land holdings and future land acquisitions, we're trying to deliver into the deepest part of the demand or unmet demand in a particular market. That's how we evaluate where we're going to go next.

Speaker #2: So that's how we evaluate where we're going to go next. We also, as I think you probably know, don't really want to have too many projects in any one part going at the same time.

Peter Baccile: We also, as I think you probably know, don't really want to have too many projects in any one park going at the same time. I mean, First Park Miami, we could start a couple of more buildings there, but we want to get some leasing as we go.

Speaker #2: I mean, first part, Miami, we could start a couple more buildings there, but we want to get some leasing as we go. So it's really not—we don't sit here and say, "Do we need to use that $400 million?" We sit here and say, "Where is the demand?"

Peter Baccile: We don't sit here and say, do we need to use that $400 million? We sit here and say, "Where is the demand? Where is it not being met, and where are we well positioned to deliver a property that's going to be competitive in that marketplace for the long term?

Speaker #2: Where is it not being met? And where are we well positioned to deliver a property that's going to be competitive in that marketplace for the long term?"

Peter E. Baccile: Where is it not being met, and where are we well positioned to deliver a property that's going to be competitive in that marketplace for the long term?

Speaker #4: Yeah, that's fair. I guess the correct way to ask the question was: Do you feel like you have any impetus to put the money out soon before you have a lot of competition coming into the marketplace and starting developments off?

Blaine Heck: Yeah, that's fair. I guess the crux of the question was just, do you feel like you have any emphasis to put the money out soon before you have a lot of competition kind of coming into the marketplace and starting developments off?

Blaine Heck: Yeah, that's fair. The crux of the question was just, do you feel like you have any emphasis to put the money out soon before you have a lot of competition kind of coming into the marketplace and starting developments off?

Speaker #2: Look, I think development is ticking up. In some markets, the demand right now for larger I mean, very large million footers is not being met.

Peter E. Baccile: Look, I think development is ticking up in some markets. The demand right now for larger, I mean, very large million footers is not being met. With respect to that's something that we're looking at. As you know, we have some land holdings that can accommodate very large format properties.

Peter Baccile: Look, I think development is ticking up in some markets. The demand right now for larger, I mean, very large million footers is not being met. With respect to that's something that we're looking at. As you know, we have some land holdings that can accommodate very large format properties.

Speaker #2: So, with respect to that, that's something that we're looking at. As you know, we have some land holdings that can accommodate very large-format properties.

Speaker #4: Very helpful. And just sneaking in a quick second one. Sorry if I missed this, but can you break out the driver or drivers of the increased same-store NOI, given that occupancy guidance was held steady?

Blaine Heck: Very helpful. Just sneaking in a quick second one. Sorry if I missed this, but can you break out the driver or drivers of the increased same store NOI given that occupancy guidance was held steady? Is that rent related, bad debt related, or something else?

Speaker #4: Is that rent related, bad debt related, something else?

Speaker #3: Yeah. If you look at the where we performed a little bit better, just our average occupancy was up slightly. And cash rental rates benefit of that.

Scott Musil: Yeah. If you look at where we performed a little bit better, just our average occupancy was up slightly. Cash rental rates benefit that, so that's really where the benefit was from.

Speaker #3: So that's really where the benefit was from.

Speaker #4: Great. Thanks, guys.

Blaine Heck: Great. Thanks, guys.

Speaker #1: And the next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.

Johannson Yap: The next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.

Operator: The next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.

Speaker #5: Hi there, everyone. Maybe just to follow up on one of those recent questions—it sounds like you are evaluating a few markets where you could start developments.

Caitlin Burrows: Hi there, everyone. Maybe just to follow up to one of those recent questions. It sounds like you guys are evaluating a few markets where you could start developments. You started one in Q2. I guess, what are you seeing the rest of the market do? It sounds, I imagine, like land is competitive, so that would suggest maybe the rest of the market's trying to get active. Are they? I'm wondering if you can talk about what you're seeing kind of the rest of the market do.

Caitlin Burrows: Maybe just to follow up to one of those recent questions. It sounds like you guys are evaluating a few markets where you could start developments. You started one in Q2. I guess, what are you seeing the rest of the market do? It sounds, I imagine, like land is competitive, so that would suggest maybe the rest of the market's trying to get active. Are they? I'm wondering if you can talk about what you're seeing kind of the rest of the market do.

Speaker #5: You started one in the second quarter. I guess, what are you seeing the rest of the market do? It sounds, I imagine, like land is competitive.

Speaker #5: So that would suggest maybe the rest of the market's trying to get active. But I was wondering if you could talk about what you're seeing the rest of the market do?

Speaker #2: Sure. I'll start, and then Joe, Joe, and Peter can add. Look, land is very, very difficult to come by. It's not getting any easier to get entitlements.

Peter E. Baccile: Sure. I'll start, and then Jojo and Peter can add. Look, land is very difficult to come by. It's not getting any easier to get entitlements. There are real barriers there. We have seen, again, a tick up in starts. It's a tough slog in terms of, again, getting entitlements, et cetera. The market's going to rebound according to the pace of lease take up, and we'll be there to take advantage of the opportunities that we see. Jojo.

Peter Baccile: Sure. I'll start, and then Jojo and Peter can add. Look, land is very difficult to come by. It's not getting any easier to get entitlements. There are real barriers there. We have seen, again, a tick up in starts. It's a tough slog in terms of, again, getting entitlements, et cetera. The market's going to rebound according to the pace of lease take up, and we'll be there to take advantage of the opportunities that we see. Jojo.

Speaker #2: There are real barriers there. We have seen, again, a tick up in starts, but it’s a tough slog in terms of, again, getting entitlements, etc.

Speaker #2: So the market's going to rebound according to the pace of lease take-up. And we'll be there to take advantage of the opportunities that we see.

Speaker #2: Joe, Joe.

Speaker #3: Yeah. Just to add to what Peter said, the land continues to be competitive. There are active developers there. There's continued to be capital to support that development.

Johannson Yap: Yeah. Just to add to what Peter said, land continues to be competitive. There are active developers there. There's continue to be capital to support that development, and that's the same through acquisitions. That's not really changed over the last, for the longest time that we've been in business. What we focus on is we try to focus on off-market deals. We try to use our brokerage relationships to try to get deals that are early in the stage. We have tenant relationships we can lean on to try to have tenant intel situations where we can try to get a pre-lease in a property. These are all platform strategies wherein we use our portfolio and our troops on the ground, which are great to try to uncover these opportunities, and that hasn't changed.

Speaker #3: And that's the same through acquisitions. That's not really changed for the longest time that we've been in business. What we focus on is, we try to focus on off-market deals.

Johannson Yap: What we focus on is we try to focus on off-market deals. We try to use our brokerage relationships to try to get deals that are early in the stage. We have tenant relationships we can lean on to try to have tenant intel situations where we can try to get a pre-lease in a property. These are all platform strategies wherein we use our portfolio and our troops on the ground, which are great to try to uncover these opportunities, and that hasn't changed.

Speaker #3: We try to use our brokerage relationships to get deals that are early in the stage. We have tenant relationships as well.

Speaker #3: We can lean on to try to have tenant in those situations where we can try to get a pre-lease and a property. So there's these are all platform strategies wherein we use our portfolio and our troops on the ground, which are great to try to uncover this opportunities.

Speaker #3: And that hasn't changed.

Speaker #5: Got it.

Caitlin Burrows: Got it. Oh, yeah.

Caitlin Burrows: Got it. Yeah.

Speaker #4: Caitlin, it's Peter. Caitlin, it's Peter. The other thing I just add to that is, as you look at where we own land and where we're focused on buying land to the earlier comments, those are generally more infill supply constrained markets.

Peter E. Baccile: Caitlin, it's Peter. The other thing I'd just add to that is as you look at where we own land and where we're focused on buying land to the earlier comments, those are generally more infill supply constrained markets. By definition, there's going to be a little less competition in some of those markets. To your other point, Pennsylvania is seeing more new starts given the lack of availability of million footers. Nashville is seeing an increase in supply given how strong that market has been. South Florida continues to see

Peter Baccile: Caitlin, it's Peter. The other thing I'd just add to that is as you look at where we own land and where we're focused on buying land to the earlier comments, those are generally more infill supply constrained markets. By definition, there's going to be a little less competition in some of those markets. To your other point, Pennsylvania is seeing more new starts given the lack of availability of million footers.

Speaker #4: So by definition, there's going to be a little less competition in some of those markets. But to your other point, Pennsylvania is seeing more new starts given the lack of availability of million footers.

Speaker #4: Nashville is seeing an increase in supply, given how strong that market has been. And South Florida continues to see activity; given the price of land, developers can't really afford to wait and are putting that into production.

Peter Baccile: Nashville is seeing an increase in supply given how strong that market has been. South Florida continues to see activity given the price of land, developers can't really afford to wait and put that into production for the most part. If you think about our Baltimore acquisition in the BW corridor as an example, very infill, very supply constrained, that's part of our strategy.

Peter Schultz: Activity given the price of land, developers can't really afford to wait and put that into production for the most part. If you think about our Baltimore acquisition in the BW corridor as an example, very infill, very supply constrained, that's part of our strategy.

Speaker #4: For the most part. But if you think about our Baltimore acquisition in the BW corridor as an example, very infill, very supply constrained. And that's part of our strategy.

Speaker #5: And so on that, I was wondering if you could talk a little bit about the sourcing of land. I think you guys mentioned earlier in the call that the Baltimore location didn't necessarily have the entitlements yet.

Caitlin Burrows: On that, I was wondering if you could talk a little bit about the sourcing of land. I think you guys mentioned earlier in the call that the Baltimore location didn't necessarily have the entitlements yet. Versus, I know sometimes when you buy land, it's contingent on the entitlements. Can you talk about that, I guess, decision to move forward with that land purchase without the entitlements versus others when it's different?

Speaker #5: So versus—I know sometimes when you buy land, it's contingent on the entitlements. So, yeah, can you talk about that decision to move forward with that land purchase without the entitlements versus others when it's different?

Speaker #4: Sure. So this is in the BW corridor, the largest submarket. And that market, it's a very infill site. It was access land as part of a horse racing track where they've been holding the precincts.

Peter Schultz: Sure. This is in the BW corridor, the largest sub-market in that market. It's a very infill site. It was excess land as part of a horse racing track where they've been holding the Preakness while that track is under renovation. The owner of the land was more interested in getting a deal done quickly. Our view is we were able to secure the land at a discount. The entitlement process there is pretty straightforward. Our plan is a buy right plan. It's zoned industrial, it's simply a matter of when, not if, going through the process. That site should be ready for construction probably end of 2028, early 2029. To emphasize the point on our pricing, the initial yields are in the mid 7s.

Speaker #4: While that track is under renovation, the owner of the land was more interested in getting a deal done quickly. So our view is we were able to secure the land at a discount. The entitlement process there is pretty straightforward.

Peter Schultz: Our view is we were able to secure the land at a discount. The entitlement process there is pretty straightforward. Our plan is a buy right plan. It's zoned industrial, it's simply a matter of when, not if, going through the process. That site should be ready for construction probably end of 2028, early 2029. To emphasize the point on our pricing, the initial yields are in the mid 7s.

Speaker #4: Our plan is a buy right plan. It's zoned industrial. So it's simply a matter of when not if going through the process. That site should be ready for construction probably end of '28, early '29.

Speaker #4: And to emphasize the point on our pricing, the initial yields are in the mid-sevenths.

Caitlin Burrows: That initial yield is your expectation when you build?

Speaker #5: That initial yield is like your expectation when you build? Got it. Thanks.

Peter Schultz: Yes.

Caitlin Burrows: Got it. Thanks.

Speaker #1: And the next question comes from Michael Carroll with RBC Capital Markets. Please go ahead.

Operator: The next question comes from Michael Carroll with RBC Capital Markets. Please go ahead.

Speaker #6: Yes, thank you. I wanted to follow up on some earlier topics about new development starts. I know that FR seems to be tracking much better tenant activity.

Michael Carroll: Yeah, thanks. I wanted to follow up on some earlier topics about new development starts. I know that FR seems to be tracking much better tenant activity. Its cost to capital has continued to head in the right direction. Does this give you guys more confidence to be a little bit more aggressive pursuing new development starts? Are there more projects out there that you're willing to break on today than maybe you weren't, or wanted to wait on about six months ago?

Speaker #6: It's cost of capital. Has continued to head in the right direction. I mean, does this give you guys more confidence to be a little bit more aggressive pursuing new development starts?

Speaker #6: I mean, are there more projects out there that you're willing to break on today than maybe you weren't or wanted to wait on about six months ago?

Speaker #3: It's still market by market.

Peter E. Baccile: It's still market by market. That's really what's driving it, and then what's happening in each sub-market. With respect to confidence, as we've always said, we've been asked, When will you develop more from a volume standpoint? We've said, When we see consistent signings of development leases. That's beginning to happen this year. Yes, the activity should be more robust over the coming six to 12 months than it was over the last six to 12 months.

Peter Baccile: It's still market by market. That's really what's driving it, and then what's happening in each sub-market. With respect to confidence, as we've always said, we've been asked, When will you develop more from a volume standpoint? We've said, When we see consistent signings of development leases. That's beginning to happen this year. Yes, the activity should be more robust over the coming six to 12 months than it was over the last six to 12 months.

Speaker #2: That's really what's driving it. And then what's happening in each submarket, with respect to confidence, as we've always said, we've been asked when will you develop more from a volume standpoint?

Speaker #2: And we've said when we see consistent signings of development leases. And that's beginning to happen this year. So yes, I mean, the activity should be more robust over the coming six to twelve months than it was over the last six to twelve months.

Speaker #6: Okay. And then, Scott, how do you plan on funding some of these development projects? I mean, is there more land sales or maybe data center opportunity type sales that FR is pursuing that could fund a lot of these projects?

Michael Carroll: Okay. Scott, how do you plan on funding some of these development projects? Is there more land sales or maybe data center opportunity type sales that FR is pursuing that can fund a lot of these projects? Or is there something where equity comes in mind if you can really start to ramp up some of the activity?

Speaker #6: Or is there something where equity comes into mind if you can really start to ramp up some of the activity?

Speaker #3: I tell you what, Mike. We don't really have a large expenditure requirement for the last six months of the year to fund our developments and process.

Scott Musil: I tell you what, Mike, we don't really have a large expenditure requirement for the last six months of the year to fund our developments and process. It's about $75 million, and a half of that will be covered with excess cash flow after CapEx and dividends, and we can use the line of credit to fund the remaining part of it. We've got a very low balance on our line of credit. As far as go forward starts are concerned, I would probably say it would be the same formula there.

Speaker #3: It's about $75 million, and half of that will be covered with excess cash flow, with a line of credit to fund the remaining part of it.

Speaker #3: We've got our very low balance on our line of credit. As far as go-forward starts, our concern, I would probably say would be the same formula there.

Speaker #6: Okay. Great. Thanks.

Michael Carroll: Okay, great. Thanks.

Speaker #1: And the next question comes from Nicholas. Please go ahead.

Operator: The next question comes from Nicholas Yulico with Scotiabank. Please go ahead.

Speaker #7: Oh, this is Victor Farrion with Nick. I want to follow up on the leasing demand and types of tenants that you kind of interact with the most.

Operator: Hello, this is Victor Feduon with Nick. I want to follow up on the leasing demand and types of tenants that you interact with the most. Last time you mentioned that data center adjacent demand isn't even in the top 10 of your tenant discussions, now you lease full property in Texas to data center adjacent tenants. Just trying to understand the breadth here and where in your sub-market you can see pick up of these type of demands.

[Analyst] (Scotiabank): Hello, this is Victor Feduon with Nick. I want to follow up on the leasing demand and types of tenants that you interact with the most. Last time you mentioned that data center adjacent demand isn't even in the top 10 of your tenant discussions, now you lease full property in Texas to data center adjacent tenants. Just trying to understand the breadth here and where in your sub-market you can see pick up of these type of demands.

Speaker #7: Because last time you mentioned that data center-adjacent demand isn't even in the top 10 of your kind of tenant discussions. And now you lease full property in Texas to, kind of, data center-adjacent tenants.

Speaker #7: So just trying to understand the breadth here. And where in your submarket can you see a pickup of this type of demand?

Speaker #2: Peter, you want to start with that one?

Peter E. Baccile: Peter, you want to start with that one?

Peter Baccile: Peter, you want to start with that one?

Speaker #4: Sure. I would say that data center-related demand has been incremental. I wouldn't say it's material. Certainly, we've signed a deal in Dallas. We've signed a deal in Atlanta.

Peter Schultz: Sure. I would say that data center related demand has been incremental. I wouldn't say it's material. Certainly, we've signed a deal in Dallas, we've signed a deal in Atlanta, we're seeing some of that, but demand overall continues to be very broad based. As I think we've already commented, led by 3PLs, manufacturing, food and beverage, automotive, and home supply. Amazon, as we've called out on prior calls, continues to be very active, particularly on larger buildings in a number of markets around the country. It's broad based. The data center related is incremental, but not overly material.

Speaker #4: And we're seeing some of that. But demand overall continues to be very, very broad-based, as I think we've already commented, led by 3PLs, manufacturing, food and beverage, automotive, and home supply.

Peter Schultz: As I think we've already commented, led by 3PLs, manufacturing, food and beverage, automotive, and home supply. Amazon, as we've called out on prior calls, continues to be very active, particularly on larger buildings in a number of markets around the country. It's broad based. The data center related is incremental, but not overly material.

Speaker #4: Amazon as we've called out on prior calls continues to be very, very active. Particularly on larger buildings in a number of markets. Around the country.

Speaker #4: So, it's broad-based. The data center-related activity is incremental, but not overly material.

Speaker #7: Understood. And then if you think about your occupancy guidance and what happened this quarter, because we saw some decline in occupancy in Southern California and what might happen for you to end up at a higher end of your average occupancy for the full year.

Peter Schultz: Understood. If you think about your occupancy guidance and what happened this quarter, because we saw some decline in occupancy in Southern California, and what might happen for you to end up at the higher end of your average occupancy for the full year? Based on your discussions that you're having now, what needs to happen?

[Analyst] (Scotiabank): Understood. If you think about your occupancy guidance and what happened this quarter, because we saw some decline in occupancy in Southern California, and what might happen for you to end up at the higher end of your average occupancy for the full year? Based on your discussions that you're having now, what needs to happen?

Speaker #7: So, based on your discussions that you're having now, what needs to happen?

Speaker #2: Well, certainly if we lease up that development pipeline, you've talked about you've heard how we have an activity on a lot of these spaces.

Peter E. Baccile: Well, certainly if we lease up the development pipeline, you've heard how we have an activity on a lot of these spaces. Obviously if the decisions get made and that happens, we'll certainly hit the higher end of our occupancy guidance.

Peter Baccile: Certainly if we lease up the development pipeline, you've heard how we have an activity on a lot of these spaces. Obviously if the decisions get made and that happens, we'll certainly hit the higher end of our occupancy guidance.

Speaker #2: So, obviously, if the decisions get made and that happens, we'll certainly hit the higher end of our occupancy guidance.

Peter E. Baccile: Thank you.

[Analyst] (Scotiabank): Thank you.

Speaker #7: Thank you.

Speaker #1: And again, if you have a question, please press star then one. The next question comes from Jessica Zhang with Green Street.

Operator: Again, if you have a question, please press star and then one. The next question comes from Jessica Zeng with Green Street. Please go ahead.

Speaker #1: Please go ahead.

Speaker #8: Hi, good morning. I'm not sure if you've covered this already, but I'm wondering if you can share some color around same-store occupancy, which seems to have declined quarter over quarter.

Operator: Hi, good morning. I'm not sure if you've covered this already, but I'm wondering if you can share some color around same-store occupancy, which seems to have declined quarter over quarter, despite the lease up of the large Central PA property. Just curious, what was the offsetting factor there?

Jessica Zheng: Good morning. I'm not sure if you've covered this already, but I'm wondering if you can share some color around same-store occupancy, which seems to have declined quarter over quarter, despite the lease up of the large Central PA property. Just curious, what was the offsetting factor there?

Speaker #8: Despite the lease-up of the large Central PA properties, I'm just curious—what was the offsetting factor there?

Speaker #2: Yeah. We had some move-outs in some of the markets. So the move-outs—we had like three or four move-outs in the 100,000 square foot range—that kind of offset the pickup of the 7,000 or 8,000 square feet.

Scott Musil: Yeah. We had some move-outs in some of the markets. The move-outs, we had three or four move-outs in the 100,000 square foot range that kind of offset the pickup of the 708,000 square feet.

Speaker #8: Okay, great. Thank you. And if I could add a follow-on, just curious if you're seeing any examples of data center developments crowding out industrial developments through elevated land pricing in any of the submarkets that you're in?

Scott Musil: Okay, great. Thank you. If I could add a follow-on. Just curious if you're seeing any examples of data center developments crowding out industrial developments through elevated land pricing in any of the sub-markets that you're in.

Jessica Zheng: Okay, great. Thank you. If I could add a follow-on. Just curious if you're seeing any examples of data center developments crowding out industrial developments through elevated land pricing in any of the sub-markets that you're in.

Speaker #2: No, Joe.

Scott Musil: JoJo?

Speaker #3: Yes. Data centers have been active acquirers or data center developers, whether it's hyperscalers or co-locators. They've been very active in acquiring land, and the land they acquire is primarily industrial.

Johannson Yap: Yes. Data centers have been active acquirers or data center developers, whether it's hyperscalers or co-locators. They've been very active in acquiring land. The land they acquire primarily industrial. It's put additional competition on potential land acquisition for industrial. In addition to that, in almost all cases, our data centers are willing to pay significantly higher prices than traditional land values. For example, one case in point is our sale in Phoenix, which is just shy of 3x of industrial land values. Yeah. They're definitely adding competition for land availability.

Speaker #3: So, it's put additional competition on potential land acquisition for industrial. In addition to that, in almost all cases, our data centers are willing to pay significantly higher prices than traditional land values.

Johannson Yap: In addition to that, in almost all cases, our data centers are willing to pay significantly higher prices than traditional land values. For example, one case in point is our sale in Phoenix, which is just shy of 3x of industrial land values. Yeah. They're definitely adding competition for land availability.

Speaker #3: For example, one case in point is our sale in Phoenix, which is just shy of 3x industrial land values. So yes, they're definitely adding competition for land availability.

Speaker #1: And the next question comes from Michael Moller with JP Morgan. Please go ahead.

Operator: The next question comes from Mike Mueller with JPMorgan. Please go ahead.

Speaker #4: Yeah. Hi. So, for the two questions — first, for the in-service occupancy dip, Scott, that you talked about going to 93.5%, I believe, and then bouncing back to 95.5%.

Mike Mueller: Yeah. Hi. For the two questions, first, for the in-service occupancy dip, Scott, that you talked about going down to 93.5, I believe, and then bouncing back to 95.5. Is that being driven by adding new developments that are fully leased and kind of going into the portfolio, or is it fallout? The second question is, when thinking about your year-to-date cash spreads of 39%, when you look at the lease expiration schedule for 2027, is there anything we should be thinking of as a positive or negative for that as we move forward?

Mike Mueller: Yeah. For the two questions, first, for the in-service occupancy dip, Scott, that you talked about going down to 93.5, I believe, and then bouncing back to 95.5. Is that being driven by adding new developments that are fully leased and kind of going into the portfolio, or is it fallout? The second question is, when thinking about your year-to-date cash spreads of 39%, when you look at the lease expiration schedule for 2027, is there anything we should be thinking of as a positive or negative for that as we move forward?

Speaker #4: Is that being driven by adding new developments that aren't fully leased and kind of going into the portfolio? Or is it fallout? And then the second question is, when thinking about your year-to-date cash spreads of 39%, when you look at the lease expiration schedule for '27, is there anything we should be thinking of as a positive or negative for that as we move forward?

Speaker #2: Yeah. First of all, on the dip, for the occupancy, actually, a part of that, about 45 basis points, is a new development coming into service in Nashville.

Scott Musil: Yeah. First of all, on the dip for the occupancy, actually, a part of that, about 45 basis points, is a new development coming into service in Nashville. That comes into service in Q3, and right now we're projecting that to at least up in the Q4. That's part of it. As far as 2027, I think it was your second part of your question. As far as right now on 2027, we've taken care of about 26% of our rollovers there and we'll give guidance on the rental rate change when we get to a bigger population.

Speaker #2: So that comes into service in third quarter. And right now, we're projecting that to lease up in the fourth quarter. So that's part of it.

Speaker #2: As far as 2027—I think that was your second part of your question—as of right now, for 2027, we've taken care of about 26% of our rollers there.

Speaker #2: And we will give some guidance on the rental rate change when we get a bigger population.

Speaker #4: Thank you.

Mike Mueller: Thank you.

Speaker #1: And the next question comes from Brendan Lynch with Barclays. Please go ahead.

Operator: The next question comes from Brendan Lynch with Barclays. Please go ahead.

Speaker #7: Great, thanks. Good morning, and thanks for taking the question. Peter, you mentioned entitlements aren't getting any easier. Have there been periods in the past where entitlements have become really challenging to obtain, like they are now, and then eased?

Brendan Lynch: Great. Thanks. Good morning. Thanks for taking the question. Peter, you mentioned entitlements aren't getting any easier. Have there been periods in the past where entitlements have become really challenging to obtain like they are now and then eased, and what could change that dynamic now?

Speaker #7: And what could change that dynamic now?

Speaker #2: Interesting. Good question. I can't remember a time when entitlements got really easy to get, especially in the markets that we want to be in.

Peter E. Baccile: Interesting. Good question. I can't remember a time when entitlements got really easy to get, especially in the markets that we want to be in. It's one of the reasons we want to be there. We want the high barriers to entry. There are times where tax revenue becomes a driver to that decision-making for a given municipality, and so you get the entitlements that you need. Generally speaking, you know, you can go state by state. You know the states that are really tough, and even Tennessee or Nashville. The Nashville market now is getting tougher as the local community begins to see a lot more 53-foot trucks and a lot more activity on the highways than they're used to seeing, and they don't like it. It's a good and bad thing.

Peter Baccile: Interesting. Good question. I can't remember a time when entitlements got really easy to get, especially in the markets that we want to be in. It's one of the reasons we want to be there. We want the high barriers to entry. There are times where tax revenue becomes a driver to that decision-making for a given municipality, and so you get the entitlements that you need.

Speaker #2: It's one of the reasons we want to be there. We want the high barriers to entry. But there are times where tax revenue becomes a driver of that decision-making.

Speaker #2: For a given municipality, you get the entitlements that you need. But, generally speaking, you can go state by state. You know the states that are really tough.

Peter Baccile: Generally speaking, you know, you can go state by state. You know the states that are really tough, and even Tennessee or Nashville. The Nashville market now is getting tougher as the local community begins to see a lot more 53-foot trucks and a lot more activity on the highways than they're used to seeing, and they don't like it. It's a good and bad thing.

Speaker #2: And even Tennessee, or the Nashville market now, is getting tougher. As the local community begins to see a lot more 53-foot trucks and a lot more activity on the highways than they're used to seeing, they don't like it.

Speaker #2: So it's a good and bad thing. It's a good thing because it of what we own. And leads to higher rent growth. And again, that's why we're in those markets.

Peter E. Baccile: It's a good thing because it limits supply, which increases the value of what we own and leads to higher rent growth. Again, that's why we're in those markets. On the other hand, it's tougher to acquire land and get it entitled. Yeah. Again, I don't know a time when it got easier, but yet there are times when the municipalities need money, and they will grant entitlements.

Peter Baccile: It's a good thing because it limits supply, which increases the value of what we own and leads to higher rent growth. Again, that's why we're in those markets. On the other hand, it's tougher to acquire land and get it entitled. Yeah. Again, I don't know a time when it got easier, but yet there are times when the municipalities need money, and they will grant entitlements.

Speaker #2: On the other hand, it's tougher to acquire land and get it entitled. So yeah, again, I can't remember a time when it got easier.

Speaker #2: But yet there are times when the municipalities need money and they will grant entitlements.

Speaker #7: Great, thanks. That's helpful. It does seem like it's somewhat structural at this point, but I guess it could change in the very long term.

Brendan Lynch: Great. Thanks. That's helpful. It does seem like it's somewhat structural at this point, but I guess that could change in the very long term. Maybe a follow-up question, just on the First Rider Logistics Center in Perris, California. Sounds like there's a lot of momentum in the surrounding area and some lease up of the surrounding assets. If you could just comment on the prospects of getting that one leased.

Speaker #7: Maybe a follow-up question. Just on the first rider logistics center in Paris, California, sounds like there's a lot of momentum in the surrounding area and some lease up of the surrounding assets.

Speaker #7: You could just comment on the prospects of getting that one leased.

Speaker #2: Joe.

Speaker #3: Yes. So the three... its first phase is about 324,000 to 325,000 square feet. Great product. It's designed to accommodate up to two tenants. And at this point, if you look at the IE, definitely there's significant pickup on the larger size.

Johannson Yap: Yes. The First Rider is about 324,000 square feet. Great product. It's designed to accommodate up to two tenants. At this point, if you look at the IE, definitely there's a significant pickup in the larger size and the whole IE vacancy tick down. The most amount of choices that tenants have are in the size range of 250 to 500. That is, I would say, kind of the softest part of the market. Still tenants have choices, and the market has to digest. That's basically what's affecting First Rider. Although the activity has picked up, RFPs, inquiries, and tours.

Speaker #3: And the whole IE vacancy takedown. But the most amount of choices that tenants have are in the size range of 250 to 500. So that is, I would say, kind of the softest part of the market.

Johannson Yap: That is, I would say, kind of the softest part of the market. Still tenants have choices, and the market has to digest. That's basically what's affecting First Rider. Although the activity has picked up, RFPs, inquiries, and tours on that asset.

Speaker #3: And still, tenants have choices. And the market has to digest. And that's basically what's affecting first rider. Although the activity has picked up, RFPs inquiries and tours.

Speaker #3: On that asset.

Scott Musil: On that asset.

Speaker #2: And then there may be sponsors slash landlords who are a little less sensitive to NPV than we are, so keep that in mind, too.

Peter E. Baccile: There may be sponsors/landlords who are a little less sensitive to NPV than we are, keep that in mind too.

Peter Baccile: There may be sponsors/landlords who are a little less sensitive to NPV than we are, keep that in mind too.

Speaker #7: Okay. Very good. Thank you.

Brendan Lynch: Okay. Very good. Thank you.

Speaker #1: And the next question comes from Omateo Akusanyia with Deutsche Bank. Please go ahead.

Operator: The next question comes from Omotayo Okusanya with Deutsche Bank. Please go ahead.

Speaker #5: Yes. Good morning, everyone. I just wanted to focus on the full-year same-store cash NOI guidance. Again, you're running well ahead of that number in the first half of 2026.

Omotayo Okusanya: Good morning, everyone. Just wanted to focus on the full year same-store cash NOI guidance. Again, you're running well ahead of that number in H1 of 2026. Just walk us through H2 of 2026, the expected deceleration, what's causing that? Is it just kind of harder comps, or is there additional fallout or anything we should be thinking about?

Speaker #5: Just kind of walk us through the second half of '26, the expected deceleration—what's causing that? Is it just kind of harder comps, or is there additional fallout or anything we should be thinking about?

Speaker #2: Yeah. I'm sorry. And you're asking about occupancy, correct? All same, sir. I'm sorry. Yes. Yeah. So in the first half of the year, yeah, so first half of the year compared to the second half of the year, it really comes down to free rent, free rent benefit, the difference there is that it's about 250 basis points.

Scott Musil: Yeah. You're asking about occupancy, correct?

Scott Musil: Yeah. You're asking about occupancy, correct? Same-store H1, H2, yes. Same-store. I'm sorry. Yeah. In the H1 compared to the H2, it really comes down to free rent benefit. The difference there is about 250 basis points. That's really the whole story.

Scott Musil: Same-store H1, H2, yes.

Scott Musil: Oh, same-store. I'm sorry. Yeah. In the H1 compared to the H2, it really comes down to free rent benefit. The difference there is about 250 basis points. That's really the whole story.

Speaker #2: So that's really the whole story.

Speaker #5: Gotcha. Okay. That's helpful. And then also want to talk about the Pennsylvania backfilling of the Pennsylvania lease. Just talk a little bit about the economics of the new lease versus the old lease.

Scott Musil: Got you. Okay. That's helpful. Also wanted to talk about the backbone of the Pennsylvania lease. Just talk a little bit about the economics of the new lease versus the old lease.

Omotayo Okusanya: Got you. Okay. That's helpful. Also wanted to talk about the backbone of the Pennsylvania lease. Just talk a little bit about the economics of the new lease versus the old lease.

Speaker #2: Peter?

Speaker #4: Sure, sure. It's Peter. I can't tell you the specifics given the confidentiality provision in the lease, but I can say it's a long-term lease—full building.

Peter E. Baccile: Peter?

Peter Baccile: Peter?

Peter E. Baccile: Sure. It's Peter. I can't tell you the specifics, given the confidentiality provision in the lease. I can say it's a long-term lease, full building. The cash rental rate increase was over 60%, 60. TIs and concessions were typical, nothing unusual. As we've said, it commenced in the end of the Q2. We had multiple prospects for that building. We're very pleased with the result.

Peter Schultz: Sure. It's Peter. I can't tell you the specifics, given the confidentiality provision in the lease. I can say it's a long-term lease, full building. The cash rental rate increase was over 60%, 60. TIs and concessions were typical, nothing unusual. As we've said, it commenced in the end of the Q2. We had multiple prospects for that building. We're very pleased with the result.

Speaker #4: The cash rental rate increase was over 60%, 6-0. TIs and concessions were typical—nothing unusual. And as we've said, it commenced at the end of the second quarter.

Speaker #4: And we had multiple prospects for that building, so we're very pleased with the result.

Speaker #5: Gotcha. Thank you.

Peter E. Baccile: Got you. Thank you.

Omotayo Okusanya: Got you. Thank you.

Speaker #1: And the next question comes from Rich Anderson with Cantor Fitzgerald. Please go ahead.

Operator: The next question comes from Rich Anderson with Cantor Fitzgerald. Please go ahead.

Speaker #7: Hey. Thanks. Good morning. So on the cash releasing spread result and guidance of 35 to 40 percent for the year, that's a really good range and a really good outcome this quarter.

Rich Anderson: Hey, thanks. Good morning. On the cash leasing spread result and guidance of 35% to 40% for the year, that's a really good range and a really good outcome this quarter relative to peer results and so on. What do you attribute that to? We've talked about this before, and I've asked this to some of your peers about what the future is for cash leasing spreads for the industry. Is there anything about this year, about markets and specific assets that's driving that up a little bit more than it would naturally be today? Where do you think cash releasing spreads start to trend down to as a company over the next call it two to three years? Thanks.

Rich Anderson: Thanks. Good morning. On the cash leasing spread result and guidance of 35% to 40% for the year, that's a really good range and a really good outcome this quarter relative to peer results and so on. What do you attribute that to?

Speaker #7: Relative to peer results and so on. How do you attribute that to? We've talked about this before, and I've asked us to some of your peers about what the future is for cash leasing spreads for the industry.

Rich Anderson: We've talked about this before, and I've asked this to some of your peers about what the future is for cash leasing spreads for the industry. Is there anything about this year, about markets and specific assets that's driving that up a little bit more than it would naturally be today? Where do you think cash releasing spreads start to trend down to as a company over the next call it two to three years? Thanks.

Speaker #7: Is there anything about this year, about markets and specific assets, that's driving that up a little bit more than it would naturally be today?

Speaker #7: And where do you think cash-releasing spreads start to trend down to as a company over the next, call it, two to three years?

Speaker #7: Thanks.

Speaker #2: Yeah, that's a good question. I think, recall that we've had pretty significant cash leasing spreads now for quite a while. They were as high as 58% a few years ago.

Peter E. Baccile: That's a good question. I think recall that we've had pretty significant cash leasing spreads now for quite a while. They were as high as 58% a few years ago, and have ticked down because market rent growth obviously has come off since the peak. A lot of this has to do with the fact that most of our portfolio now is new. We leased it, if you want to say this, at the right time. We had big spaces to lease pre-peak, and so we're enjoying the benefit of that now. The markets that we're in, SoCal obviously grew the most and came down the most, but the CAGR there is still kind of 11%, 12% over the last five or six years. In the eastern half of the country where the markets didn't go quite as sky-high, they also haven't fallen as much.

Peter Baccile: That's a good question. I think recall that we've had pretty significant cash leasing spreads now for quite a while. They were as high as 58% a few years ago, and have ticked down because market rent growth obviously has come off since the peak. A lot of this has to do with the fact that most of our portfolio now is new.

Speaker #2: And it ticked down because market rent growth obviously has come off since the peak. A lot of this has to do with the fact that most of our portfolio now is new.

Speaker #2: We leased it, if you want to say this, at the right time. We had big spaces to lease pre-peak, and so we're enjoying the benefit of that now.

Peter Baccile: We leased it, if you want to say this, at the right time. We had big spaces to lease pre-peak, and so we're enjoying the benefit of that now. The markets that we're in, SoCal obviously grew the most and came down the most, but the CAGR there is still kind of 11%, 12% over the last five or six years. In the eastern half of the country where the markets didn't go quite as sky-high, they also haven't fallen as much.

Speaker #2: And the markets that we're in—SoCal obviously grew the most and came down the most—but the CAGR there is still kind of 11–12 percent over the last five or six years.

Speaker #2: And in the eastern half of the country, where the markets didn't go quite as sky-high, they also haven't fallen as much. So we're in the right places with the right product.

Peter E. Baccile: We're in the right places with the right product, the right functionality, and the buildings that we have are very competitive in their marketplaces. That doesn't happen by chance or by accident, and it's a long way to say that our strategy is working.

Peter Baccile: We're in the right places with the right product, the right functionality, and the buildings that we have are very competitive in their marketplaces. That doesn't happen by chance or by accident, and it's a long way to say that our strategy is working.

Speaker #2: The right functionality and the buildings that we have are very competitive in their marketplaces. So that doesn't happen by chance or by accident. And it's a long way to say that our strategy is working.

Speaker #7: Okay, fair enough. And second question—I probably asked this six months ago, but maybe the answer is changing: Inland Empire, land of six and a half million FAR-foot—you've said that you find that to be a valuable sort of option for you longer term.

Rich Anderson: Okay. Fair enough. Second question, I probably asked this six months ago, but maybe the answer is changing. On Inland Empire land of six and a half million FAR foot, you've said that you find that to be a valuable sort of option for you longer term, but you would think that you could do some selling in that portfolio. You're already pretty full on Southern California. I'm curious what your strategy is on the land specifically and generally where you're comfortable Southern California, i.e., whatever is as a percentage of the total. Are you comfortable going significantly higher than where you are now, so on? Any color you can give on that topic would be great. Thanks.

Speaker #7: But you would think that you could do some selling in that portfolio—you're already pretty full on Southern California. I'm curious what your strategy is on the land specifically, and generally where you're comfortable—Southern California, Inland Empire, whatever—as a percentage of the total.

Rich Anderson: I'm curious what your strategy is on the land specifically and generally where you're comfortable Southern California, i.e., whatever is as a percentage of the total. Are you comfortable going significantly higher than where you are now, so on? Any color you can give on that topic would be great. Thanks.

Speaker #7: Are you comfortable going significantly higher than we are now, so on? Any color you can give on that topic would be great. Thanks.

Speaker #2: So, over the last few years, all of our new development has been outside California. That has been the way to go, given where the markets are.

Peter E. Baccile: Over the last few years, all of our new development has been outside California.

Peter Baccile: Over the last few years, all of our new development has been outside California. That has been the way to go given where the markets are. We continue to look for more land outside California. The balancing will happen that way. It'll happen more by investment in other places than it would by selling there or selling land. Now, we have some great sites there.

Peter E. Baccile: That has been the way to go given where the markets are. We continue to look for more land outside California. The balancing will happen that way. It'll happen more by investment in other places than it would by selling there or selling land. Now, we have some great sites there. As you've heard on this call, the market is very short on million footers, million-plus footers, and we have some fantastic opportunities in SoCal in that size range. They're a little bit further out because of the way that market has evolved since the peak, but those are going to be very important opportunities for us going forward. Having said that, we're not in love with any of our real estate, and if somebody makes us a godfather offer, it will be sold.

Speaker #2: We continue to look for more land outside California. And so the balancing will happen that way. It'll happen more by investment in other places than it would by selling there or selling land.

Speaker #2: Now, we have some great sites there. And as the market—as you've heard on this call—the market is very short on million-footers, million-plus footers.

Peter Baccile: As you've heard on this call, the market is very short on million footers, million-plus footers, and we have some fantastic opportunities in SoCal in that size range. They're a little bit further out because of the way that market has evolved since the peak, but those are going to be very important opportunities for us going forward. Having said that, we're not in love with any of our real estate, and if somebody makes us a godfather offer, it will be sold.

Speaker #2: And we have some fantastic opportunities. And so Cal, in that size range. So they're a little bit further out because of the way that market has evolved since the peak.

Speaker #2: But those are going to be very, very important opportunities for us going forward. Having said that, we're not loving any of our real estate.

Speaker #2: And if somebody makes us a Godfather offer, it will be sold.

Speaker #7: All right. Thanks very much.

Rich Anderson: All right. Thanks very much.

Speaker #1: And our final question comes from Dave Rogers with Raymond James. Please go ahead.

Operator: Our final question comes from Dave Rogers with Raymond James. Please go ahead.

Speaker #5: Yeah, just one follow-up, guys. I wanted to kind of aggregate some of the numbers we talked about. I think everybody on the call, including me, did a good job of asking about every project that I think you have currently going on.

Dave Rogers: Yeah, just one follow-up, guys. I wanted to just kind of aggregate some of the numbers we talked about. I think everybody on the call, including me, did a good job of asking about every project that I think you have currently going on. If you were to aggregate the amount of demand that would meet that 800,000 to 900,000 sq ft of remaining spec leasing that I think you need to do, if my math is okay, for the rest of the year, what is the total demand for that kind of pool of assets that kind of gives you the continued confidence to get there? Is there a way you can aggregate that together?

Speaker #5: But if you were to aggregate the amount of demand that would meet that 800,000 to 900,000 square feet of remaining spec leasing that I think you need to do—if my math was okay—for the rest of the year, what's the total demand for that kind of pool of assets that gives you the continued confidence to get there?

Dave Rogers: If you were to aggregate the amount of demand that would meet that 800,000 to 900,000 sq ft of remaining spec leasing that I think you need to do, if my math is okay, for the rest of the year, what is the total demand for that kind of pool of assets that kind of gives you the continued confidence to get there? Is there a way you can aggregate that together?

Speaker #5: Is there a way you can aggregate that together?

Speaker #2: I think we're all looking at each other here, Dave, wondering how to answer that question.

Peter E. Baccile: I think we're all looking at each other here, Dave, wondering how to answer that question.

Peter Baccile: I think we're all looking at each other here, Dave, wondering how to answer that question.

Speaker #3: I think the one thing is that, Dave, the opportunity set is 1.7 million square feet. So we don't have to bet 100% with the developments we have.

Scott Musil: I think the one thing is that, Dave, the opportunity set is 1.7 million square feet, we don't have to bat 100% with the developments we have. That's one part of the answer.

Speaker #3: So that's one part of the answer.

Speaker #2: Also, when you're touring a prospect, whether it's an RFP process or it's an expansion or a consolidation, or it's an inquiry, it's really kind of hard to tell to how, what the timing is and what the commitment of a particular prospect is, and then if it's a renewal exercise.

Johannson Yap: Also, when you're touring a prospect, whether it's an RFP process or it's an expansion or a consolidation, or it's an inquiry, it's really kind of hard to tell what the timing is and what the commitment of a particular prospect is, and if it's a renewal exercise. If we put out numbers of all of our tours, of course, it's going to be a big number, but I think it's disingenuous to put that because until you're really trading paper and get to a letter of intent, that's where really the certainty happens.

Speaker #2: So, I mean, it's going to be—I mean, if we put out numbers of all of our tours, of course it's going to be a mid number.

Speaker #2: But I think it's disingenuous to put that, because until you're really trading paper and get to a letter of intent, that's where the real certainty happens.

Speaker #4: I mean, all it takes is one.

Peter E. Baccile: All it takes is one.

Peter Baccile: All it takes is one.

Johannson Yap: Yeah.

Speaker #2: So it's a tough thing to put a bracket around, David, because we've had assets where we've had really, really strong competition—a horse race—and we've had assets where we had one interested party, and we drove a tough enough deal and they signed the lease.

Peter E. Baccile: It's a tough thing to put a bracket around, David, because we've had assets where we've had really, really strong competition, a horse race, and we've had assets where we had one interested party, and we drove a tough enough deal, and they signed the lease. It's tough to give you a volume answer to that question.

Peter Baccile: It's a tough thing to put a bracket around, David, because we've had assets where we've had really, really strong competition, a horse race, and we've had assets where we had one interested party, and we drove a tough enough deal, and they signed the lease. It's tough to give you a volume answer to that question.

Speaker #2: But it's tough to give you a volume answer to that question.

Speaker #6: But Dave, it's Peter. The thing I would say is, back to what we talked about at the top end of the call, we are seeing more activity, more tours, and inquiries.

Peter Schultz: Dave, it's Peter. The thing I would say is, back to what we talked about at the top end of the call, is we are seeing more activity, more tours and inquiries. While we have to convert, I think we're more optimistic today than we were at the beginning of the year.

Speaker #6: And while we have to convert, I think we're more optimistic today than we were at the beginning of the year.

Speaker #5: That's really helpful. Thanks, everyone.

Dave Rogers: That's really helpful. Thanks, everyone.

Speaker #1: This concludes our question-and-answer session. I would like to turn the conference back over to Peter Baccile for any closing remarks.

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

Speaker #2: 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.

Peter E. Baccile: Thank you, operator. 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. Have a great day.

Peter Baccile: Thank you, operator. 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. Have a great day.

Speaker #2: Have a great day.

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

Q2 2026 First Industrial Realty Trust Inc Earnings Call

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