First Industrial Realty Trust’s Earnings Call Insights

First Industrial Realty Trust ((FR)) has held its Q2 earnings call. Read on for the main highlights of the call.

First Industrial Realty Trust’s recent earnings call showcased a balanced sentiment, highlighting strong rental growth and successful leasing in development projects. However, this optimism was tempered by challenges such as decreased occupancy and uncertainties related to tariffs impacting decision-making. Concerns were also raised about the impact of interest rates on future funds from operations (FFO).

Strong Cash Rental Rate Growth

The company reported a robust cash rental rate increase of 33% for new and renewal leasing, aligning with their expectations of 30% to 40% growth. This demonstrates the company’s effective management and strategic leasing efforts.

Successful Development Leases

First Industrial Realty Trust successfully leased 501,000 square feet in the Camelback 303 joint venture in Phoenix, achieving full occupancy for the 1.8 million square foot project. Additionally, they leased 58,000 square feet at the First Loop project in Orlando, underscoring their development success.

Bond Market Milestone

The company marked a significant milestone by issuing $450 million of senior unsecured notes at a 5.25% coupon rate. This was their first public bond offering since 2007, following an upgrade by Fitch to BBB+.

NAREIT FFO Growth

NAREIT funds from operations increased to $0.76 per fully diluted share, up from $0.66 per share in the second quarter of 2024. This growth reflects the company’s strong financial performance.

Occupancy Decline

The in-service occupancy rate fell to 94.2%, a decrease of 110 basis points, due to a known move-out in Central Pennsylvania and two developments entering the in-service pool.

Tariff Uncertainty Impact

Ongoing tariff uncertainties continue to affect decision-making, dampening momentum around leasing activity. This remains a challenge for the company as it navigates the current economic landscape.

Interest Rate Impact on FFO

Higher interest expenses in the latter half of the year are expected to reduce FFO, attributed to funding the development pipeline and the slightly dilutive May bond offering.

Forward-Looking Guidance

First Industrial Realty Trust provided comprehensive guidance for the remainder of 2025, maintaining its NAREIT FFO guidance range at $2.92 per share at the midpoint, with a narrowed range of $2.88 to $2.96 per share. They project an average quarter-end in-service occupancy of 95% to 96% and a cash same-store NOI growth of 6% to 7%. The company also noted a decrease in new construction start volume and highlighted a vacancy rate in Tier 1 U.S. markets of 6.3%.

In conclusion, First Industrial Realty Trust’s earnings call reflected a mix of optimism and caution. While the company demonstrated strong rental growth and successful development leasing, challenges such as decreased occupancy and tariff uncertainties remain. The forward-looking guidance suggests a stable outlook with continued focus on strategic growth and financial performance.