First Industrial Realty Trust Wraps Up Successful 2024, Eyes 10% FFO Growth in 2025
First Industrial Realty Trust, Inc. concluded a remarkable year of growth in 2024, marked by exceptional cash rental rate increases and strong development leasing activity. In its recent fourth quarter results call, the company's leadership celebrated this success while providing an update on the current industrial market and offering initial guidance for 2025.
The First Industrial Realty Trust team achieved a cash rental rate increase of 51% in 2024, making it the second highest growth rate in their 30-year history. This achievement marks back-to-back years with growth rates above 50%. Looking ahead to 2025 lease expirations, the company has made significant progress and is now through 59% by square footage, according to President and Chief Executive Officer Peter Baccile.
The industrial market's overall performance was also discussed during the call. CBRE EA reported a 30-basis-point rise in U.S. industrial market vacancy, reaching 6.1% at year-end. However, new construction start volume declined significantly, with only 43 million square feet breaking ground in Q4 '24. This reduction is attributed to the election uncertainty now behind us.
Net absorption nationally was 24 million square feet in the fourth quarter, with 15 million of it being within First Industrial's target markets. The company remains hopeful that this reduction in uncertainty will lead to a stronger commitment to growth investing and a more consistent pace in development leasing.
The company's portfolio performance was also highlighted during the call. As of year-end, the in-service occupancy rate reached 96.2%, aided by fourth-quarter development leasing activity. The team delivered an excellent year of development leasing, signing 4.7 million square feet of development leases, inclusive of their joint venture. This surpasses the budgeted number of 2.8 million square feet in their original 2024 guidance.
Development leasing signings were broad-based and represented 10 out of the company's 15 target markets, including Northern and Southern California, Nashville, Central Pennsylvania, Phoenix, Houston, Chicago, Seattle, Miami, and Denver. The team signed a full-building lease for its 542,000 square footer in Nashville with a repeat customer nine months ahead of anticipated building completion.
First Industrial Realty Trust also provided guidance on cash rental rate growth for 2025, expecting it to range from 30% to 40% overall and 35% to 45% excluding the 1.3 million square foot fixed-rate renewal in Central Pennsylvania discussed on their last call.
The company's leaders are confident that these successes will have a positive impact on their 2025 FFO growth, with expectations of approximately a 10% increase based on the midpoint of their guidance.
As First Industrial Realty Trust looks to build upon its success in 2024 and execute its strategic initiatives, investors remain optimistic about the company's prospects for continued growth and expansion. With a strong portfolio performance, robust development leasing activity, and expectations of further cash rental rate increases, the company appears poised for another successful year.
