Supply and Demand Trends
Q: What's your outlook on supply and demand over the next quarters?
A: We project 250 million square feet of net absorption and 285 million square feet of completions in 2024, with supply front-loaded. Vacancy rates are expected to rise by 50–75 basis points to peak around 6%–6.1% in the first half, then decline meaningfully into 2025 and 2026.

Leasing Spreads U.S. vs. International
Q: Will the U.S. continue to lead in leasing spreads, or will the gap tighten?
A: The gap is expected to remain relatively similar, with the U.S. continuing to lead due to the pronounced lease mark-to-market effect in the U.S. compared to elsewhere. This effect will sustain for quite a while, keeping the spread wide.

Tenant Sentiment and Big Leasing
Q: Is big tenant leasing activity improving as tenant sentiment strengthens?
A: Tenant sentiment has marginally improved in the last 30 days. Proposal volumes are healthy, with 45% of available space in active discussions. Build-to-suit conversations are also improving, indicating early signs of increased big tenant leasing activity.

Spec Development vs. Build-to-Suit
Q: How will decreasing development starts impact spec development vs. build-to-suit?
A: We plan to pursue both spec and build-to-suit developments. We started over $1 billion in spec projects in Q4 and have a 2024 guidance of $4 billion in starts, reflecting an appetite for speculative development. Build-to-suit volume is expected to be around 40% of total starts.

Data Center Development Plans
Q: Can you break down the $3 billion development starts between industrial and data centers?
A: The majority of development starts are industrial. We began over $500 million in data center projects in Q4 but won't provide specific guidance due to the lumpiness and competitive nature of these deals. Data centers typically take 12–15 months from start to cash flow for powered shells, and longer for turnkey projects.

Valuation and Cap Rates
Q: Has pricing adjusted correctly with changes in the 10-year Treasury rate?
A: Real pricing and returns haven't significantly changed, as market participants weren't trading based on higher return requirements despite higher treasury rates. With treasury rates stabilizing and expectations converging, valuations are nearing a bottom in both the U.S. and Europe, leading to anticipated increases in transaction volumes.

Retailer Inventory Restocking
Q: How does retailer restocking affect leasing demand seasonally?
A: Leasing demand is typically back-end loaded toward Q4 due to holiday sales. This year, stronger-than-expected retail and e-commerce sales caught retailers short on inventories. As a result, space utilization is down, and retailers will likely need to restock inventories, which should drive leasing demand moving forward.

Vacancy Rates and Leasing Timeline
Q: How long will it take to lease up new deliveries and see vacancy decline?
A: Vacancy rates are expected to peak at around 6% in the first half, which is historically low. It will take time to absorb availability, but vacancy rates are projected to decrease from 6% to 5.5% and likely to 5% over time, given the supply cliff and ongoing demand.

Big Box Leasing Interest
Q: Is there increased customer interest in big box leasing?
A: Yes, we're seeing definite signs of increased interest from large customers. After holding off, they're beginning to build out their networks again, especially in e-commerce. With the economy performing better than expected, big box tenants are returning to the market.

Stabilization Timing and Port Disruptions
Q: What's the timing for development stabilizations amid elevated supply, and how are tenants adapting to port disruptions?
A: Stabilizations are well spread throughout the year, with some pulled forward to late December. Stabilization volume is 46% leased already, 300–400 basis points above recent averages. Regarding port disruptions, it's early to see medium-term leasing decisions, but the ratified West Coast labor agreement provides a clear landscape, and growth is resuming in Southern California. Disruptions in Panama and Suez are prompting a return to traditional shipping routes, positively impacting West Coast activity.