Rexford Industrial Powers Through Uncertainty with Strong Q1 2025 Performance
Rexford Industrial, a leading industrial real estate company, has delivered a solid first quarter performance despite facing heightened macroeconomic uncertainty. The company's quarterly earnings conference call, held on April 17, 2025, provided insight into its strong execution and position in the market.
According to Laura Clark, Chief Operating Officer, Rexford executed 2.4 million square feet of leases, achieving net effective and cash rent spreads of 24% and 15%, respectively. This demonstrates the company's ability to navigate challenging market conditions and capitalize on opportunities. The embedded rent steps in its executed leases averaged 3.6%, further highlighting Rexford's success.
One notable aspect of Rexford's Q1 performance is its strong tenant retention, with an impressive 82% rate. This is the highest level over the past year, indicating a high level of satisfaction among tenants with the company's properties. The company's smaller format spaces under 50,000 square feet have shown relative resilience, supported by limited supply comparable to Rexford's superior highly functional product.
However, the leasing environment has become more uncertain since the recent tariff announcements. Laura Clark noted that some tenants have deferred decision-making amid increased economic uncertainty, and the company currently has leasing activity on approximately 80% of its vacant spaces. While overall engagement remains healthy, it is difficult to predict the near-term impact surrounding the tariffs and overall levels of uncertainty.
Rexford's capital allocation strategy continues to drive accretive cash flow growth and long-term value creation. The company stabilized 5 repositioning projects totaling 560,000 square feet at a 7.6% unlevered yield and completed 2 dispositions totaling $103 million at exit cap rates in the low 4% area. Its capital allocation and recycling strategy will continue to be focused on maximizing returns and accretion.
The company's value-add repositioning and redevelopments are a key driver of accretive growth, with $70 million of incremental NOI expected in the near term from the 3.2 million square feet of projects under construction or in lease-up. Rexford has approximately $30 million of dispositions under contract or accepted offer subject to customary closing conditions.
As Laura Clark noted, "Our portfolio continues to be well positioned over the medium to longer term." The company's high-quality portfolio located in Infill Southern California is expected to benefit from a long-term supply-demand imbalance. Despite facing uncertainty related to new tariffs, Rexford Industrial remains confident in its position and ability to navigate challenging market conditions.
