Race to the Bottom
With the bottom of the market in sight, industrial real estate investors are hedging their bets so that they do not lease a building cheap today and forgo rent increases for the next five years. That means of all the buildings that are available in the market, there are less truely open for business than what you see on a property survey. 1/3 of properties have multiple proposals on them as companies are sending out multiple proposals to shop for deals. 1/3 of properties have landlords that wants a 3 year lease, or a 7 -10 year lease with a 10% lease rate increase halfway through. That means only 1/3 of properties are available to do a normal 5 year lease.
Tenant's on the other hand are still delaying until the last moment in many instances to make a move. Reasons for delaying span from waiting for the market pricing to go down, waiting to see how the tariffs shake out, or figuring out how to deal with operating in a market that is all around expensive to do business in. When tenants do get out in the market though it is a roller coaster in that every property is its own unique opportunity and no two counter offers are the same with each landlord putting their own unique twist on terms, deal structure, or what is important to them. We're finding a side by side deep dive analysis of lease options is helping executives make sense and make decisions.
With the bottom of the market being seen happening in the next two quarters that tells me that this is the year to make your move whether it is bigger, smaller, in another city, or to purchase.
Prologis Earnings Call
Prologis is the largest industrial landlord in the United States. On Prologis's earnings call they mentioned that they think market vacancy is topping out and rents will inflection later this year. They report an increase in customer retention from 73.1% to 78.4% over the trailing 12 months. And like many other landlords in Southern California, today's new lower rates are still higher than the lease rate you are paying if you signed a lease 2-3 years ago meaning that there is still an increase coming on many of your leases upon lease expiration. What I know is that once a Prologis customer, you likely want to stay a Prologis customer. We've brought countless tenants to them and found it makes our clients lives easier with their Clear lease which minimizes operating expense increases in the future, the lease contract is super straight forward, and they are very pro business. You can review their earnings report here .
Rexford Earnings Call
Rexford the largest industrial landlord focused purely on Southern California. On Rexford's earnings call they mentioned that small to mid size tenants down only 8% over that of big box tenants who have shed the most space are down 25%. Rexford is estimating flat rent growth this year. Rexford has some very nice Class A properties that are recently completed or completing in this next quarter. I know as I've toured and offered on them with clients and found them very focused on deal making. A big differentiator that you may not be aware of is the quality of construction that goes into their new buildings with all of the finishing touches going onto the inside and outside of the property. They include office improvements that are a notch above and beyond everybody's properties. We can get you up to speed on their properties immediately. You can review their earnings report here .
Manifest 2025
Manifest is a supply chain conference in Las Vegas with the who's who of supply chain. Over 3 days there were countless panels talking about what is new in supply chain. AI and tariffs were 80% of peoples concerns. AI innovations are happening in every part of the supply chain with the quest for companies to have end-to-end visibility and ability to model and analyze every step all the way from the first click on a website, to corporate finance, to fulfillment to the box on your door. Additional topic ranged from near shoring 2.0 to EV infrastructure and truck fleet innovations, and more. We're excited to be part of the ecosystem and prepared to make sure we have the best partners when it comes to supporting our needs. You can see a list of speakers here .
Annual Planning
We find clients like us to update the value of their properties every year:
* Broker Opinion of Values (BOV's) for their owner warehouses * Fair Market Value (FMV) analysis for their leased properties or properties where they own them individually and lease them to their companies * Competitive Set when they have properties for lease and wondering how their properties stack up to the competition * Property Surveys when they want to keep an eye on the market to figure out when it makes sense to lease or buy for their next move.
What is most helpful for you? Drop us a line with your property address and we'll add you to the list of clients that we update for so that you have actionable intelligence when you need to make your next move.
Interviews with Industry Leaders
Here is our latest new podcast episode that dive into key market trends and strategies for success: 1. Warehouse Automation – Parth is one of the leaders of Prologis's Warehouse Innovation and Design department helping all of there customers along the maturation process of implementing warehouse automation. Prologis is excelling in serving their tenant which is why we have such great alignment and similar outlooks. + Podcast Episode link + YouTube Video link
Call to Action
What would you like to accomplish this year? Send us an update on your intent for the year and we'll come back to you with a few strategies and tactics for how we might be able to add value to the relationship and to your organization. Look forward to it!
Best Regards,
Justin Smith, SIOR MBA, MRED, MCR, MSCM Candidate Senior Vice President | Principal Lee & Associates | Irvine
D 949.790.3151 C 949.400.4786 O 949.727.1200 jbsmith@lee-associates.com (mailto:jbsmith@lee-associates.com) ____________________________________
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