Rexford Sells $1.3B of SoCal Industrial as Leasing Rebounds

Rexford Industrial Realty, long Southern California’s biggest buyer of warehouse and light-industrial space, is now one of its largest sellers. The Los Angeles-based real estate investment trust completed $1.3 billion in property sales during the third quarter, according to reporting by Commercial Observer on the company’s earnings call.

The REIT sold 25 properties totaling 5.5 million square feet in the quarter. That included its previously announced $1.2 billion sale to EQT Real Estate, the largest deal in Rexford’s history. Chief Operating Officer John Nahas said the EQT portfolio carried a weighted average remaining lease term of just 2.7 years, with rents nearly 30 percent above market. Rexford also sold three properties, about 251,000 square feet in all, to owner-users for $86 million.

Year to date, Rexford has sold $1.5 billion in assets as part of a $2 billion portfolio realignment. CEO Laura Clark said on Friday’s call that the company expects to close most of the remaining $500 million in planned sales by year-end. She cautioned that rising Treasury yields could complicate deals. “While recent increases in Treasury rates are impacting the cost of capital for certain buyers, and bringing more selectivity to the transaction market, engagement around the remaining disposition assets remains constructive,” Clark said.

Rexford made no acquisitions in the quarter. Clark said buying remains part of the long-term strategy but not at the expense of other investments. “Today, other uses of capital are more compelling,” she said. “We can afford to be patient.”

Leasing, meanwhile, picked up. Rexford signed 116 leases covering 3.74 million square feet, up from 2.1 million square feet in the second quarter and from 3.27 million a year earlier. Clark called it the company’s second-highest quarter of leasing ever. Same-property occupancy rose to 96.9 percent from 94.9 percent in the second quarter, though it remains slightly below the 97.1 percent recorded a year ago. Net effective rent spreads on new leases rose 7.1 percent, compared with a 2.8 percent decline in the prior quarter.

CFO Michael Fitzmaurice cautioned that leases signed near the 2022 and 2023 market peak could weigh on rent growth. Light and advanced manufacturing made up about a third of leasing activity, Nahas said, with logistics, distribution and warehouse users accounting for another third.

The financial results were mixed. Third-quarter revenue came in at $239.1 million, down from $245.5 million in the second quarter and $253.2 million a year earlier. Core funds from operations totaled $132.7 million, versus $141.4 million in the prior quarter and $141.7 million a year ago. Net income was $14.6 million, a rebound from a $506.9 million loss in the second quarter but well below $87.1 million a year earlier. Property impairment charges fell to $71.8 million from $624.8 million.

On development, Rexford trimmed its 2026 plan from 1.2 million square feet to 800,000 square feet. Its pipeline includes 2.12 million square feet of completed or in-progress projects, representing an estimated $726.8 million in investment and $39 million to $43 million in annualized net operating income. Nahas said construction is expected to begin in November on a 401,000-square-foot development at 9000 Airport Boulevard in the South Bay, aimed at advanced manufacturers and other industrial users.

For New York investors watching industrial real estate, Rexford’s pivot offers a data point on how one of the sector’s biggest players is pricing capital, patience and selectivity as borrowing costs shift.