First Industrial Realty Trust, Inc. Q2 FY2026 earnings call

Market Fundamentals

• Industry industrial fundamentals are trending positively: national vacancy improved 20 basis points to 6.5% at the end of Q2 2026, per CBRE data. Net absorption hit 85 million square feet nationally, nearly double Q1 2026 levels and exceeding new supply deliveries of 48 million square feet.
• The national construction pipeline increased modestly to 252 million square feet, and remains 38% pre-leased, with new delivery pace moderating as expected.

Portfolio Leasing Performance

• 80% of 2026 rollovers by square footage have been completed as of Q2 end, with an overall cash rental rate increase of 39% for all signed new and renewal leases.
• Significant large-format leasing wins were secured in the quarter, including the full 708,000 square foot building lease in central Pennsylvania, full building leases for a 176,000 square foot development in Dallas and a 226,000 square foot development in Philadelphia, and a full sublease for the 1.1 million square foot former Debenhams/Boohoo space in Pennsylvania to an existing 3PL tenant.
• Demand growth is strongest for large-format industrial spaces: activity for spaces 700,000–1,200,000 square feet is up 127% year over year, and activity for spaces over 1,200,000 square feet is up 117% year over year, driven by scarcity value as available supply shrinks. Demand is broad across tenant categories: 3PL activity is up 18% year over year, while manufacturing, food and beverage, and automotive activity is up over 25% year over year, with incremental growth from data center-adjacent, aerospace and defense, and e-commerce tenants like Amazon.

Investment, Disposition and Development Activity

• Acquisitions included a 161,000 square foot 50% leased recently completed development in Dallas' Great Southwest submarket for $26 million, targeting a 6% cash yield, and a 58-acre infill development site in Baltimore's BW Corridor for $39 million, which can accommodate 629,000 square feet of total industrial space after full entitlement.
• Dispositions closed as planned: a $131 million land sale in Phoenix at $30 per land square foot (nearly three times current local industrial land values), and four Detroit buildings totaling 310,000 square feet for $29 million, leaving only one 16,000 square foot building remaining in the Detroit market.
• A second 613,000 square foot building is breaking ground at First Park Newcastle in Philadelphia, with a total estimated investment of $77 million and a projected cash yield above 8%. Two additional ongoing projects totaling $70 million (First Arlington Commerce Center in Texas and First Park Miami building) are on track for completion at the end of 2026 and early 2027.
• Southern California's industrial market is confirmed to be off its bottom and in the early stages of recovery, with net absorption exceeding new deliveries, construction starts at historic lows, and rents stabilizing after prior corrections.

First Industrial Realty Trust operates as a single-segment industrial real estate firm focused on industrial logistics and development properties, so no separate product segment breakdown is provided. For Q2 2026, core operating funds from operations (NARID FFO) were $0.82 per fully diluted share, up from $0.76 per share in the year-ago quarter. Cash same-store net operating income (NOI) growth (excluding termination fees) hit 6.7% for the quarter, driven by higher rental rates on new and renewal leases, contractual rent bumps, and lower free rent, partially offset by lower average occupancy. The firm ended Q2 2026 with an in-service portfolio occupancy of 94.9%, an increase of 60 basis points from Q1 2026, primarily due to the full-building 708,000 square foot lease in central Pennsylvania. Total leasing commencements for the quarter were 2.6 million square feet, consisting of 1.1 million square feet of new leases, 1 million square feet of renewal leases, and 500,000 square feet of leases for development and acquisition lease-up properties. Total development lease signings in the quarter reached 643,000 square feet, bringing cumulative development signings to date to 433,000 square feet beyond the prior quarter's total.

• Full year 2026 NARID FFO guidance range is adjusted to $3.08 to $3.16 per share, an increase of $0.02 at the midpoint from prior guidance, which reflects $0.04 per share of Q1 advisory costs from the contested proxy campaign. Excluding these advisory costs, the full year FFO guidance range is $3.12 to $3.20 per share, also a $0.02 increase at the midpoint. • Cash rental rate guidance for 2026 lease commencements is tightened to 35% to 40%, with an increase at the midpoint from prior ranges. • Average quarter-end in-service occupancy guidance range is maintained at 94% to 95% for full year 2026. Guidance projects a temporary dip to ~93.5% occupancy at the end of Q3 2026 (driven by unleased new development delivering in Q3) followed by a rebound to ~95.5% occupancy at year-end, driven by expected 900,000 square feet of incremental development leasing from a total opportunity set of 1.7 million square feet, primarily expected to close in Q4 2026. • Full year 2026 cash same-store NOI growth (before termination fees) guidance is adjusted to 5.25% to 6.25%, a 25 basis point increase at the midpoint from prior guidance. • G&A expense guidance range is $42 to $43 million for full year 2026, excluding the $5.6 million of one-time costs related to the contested proxy campaign. Approximately $0.08 per share of interest is expected to be capitalized for 2026 development projects.

• Entitlement approval for new development remains increasingly difficult, especially in high-barrier infill markets, which can delay project timelines and increase development risk. Local community pushback against new industrial development (driven by concerns over truck traffic) is worsening in fast-growing markets like Nashville, further constraining entitlement progress. • A larger supply of available mid-sized industrial space (250,000 to 500,000 square feet) in markets like Southern California's Inland Empire means leasing for properties in this size range is slower than for large-format space, creating near-term vacancy and rental pressure for these assets. • Data center developers' ongoing demand for industrial land increases competition for acquisition opportunities and drives up land prices for industrial development projects, squeezing potential returns for new industrial development. • Forward-looking projections of leasing activity and occupancy depend on tenant decision-making that can differ from management expectations, creating downside risk to guidance if lease signings are delayed or fall through.

Q: Can you elaborate on how strengthening demand for large-format industrial space will trend through the back half of 2026, and what is the update on the First Aurora project and the Southern California recovery? / A: Management confirms large-format space has significant scarcity value, with activity up sharply year-over-year across major markets like Chicago and Dallas, driving faster tenant decision-making. Demand growth is broad-based across most tenant categories, with incremental additional demand from data center-adjacent and aerospace tenants. At First Aurora, there is no shortage of prospect interest, but management is still waiting for definitive tenant decisions. Southern California's market is confirmed to be off its bottom and in early recovery, with net absorption outpacing new supply and construction starts at historic lows, performing better than management expected. (412 characters)

Q: With the Dallas acquisition, what is First Industrial's current acquisition appetite, and will you prioritize deals in markets where you already see strong leasing demand like Texas and Pennsylvania? / A: Management confirms the team is always actively sourcing high-quality acquisition opportunities that meet the firm's yield and quality criteria. The recent Dallas deal was an off-market, lightly marketed opportunity in a well-known infill submarket where the firm already has existing portfolio presence, so it fit the investment strategy perfectly. The firm will continue to pursue similar value-add acquisition opportunities in high-demand markets, but will not deviate from its strict investment return requirements. (398 characters)

Q: Do you feel pressure to deploy your $410 million in available spec development capital soon, before competitors enter the market and create excess future supply? How do you time new development starts? / A: Management notes that the $410 million is a cap, not a required deployment target. New starts are only approved when there is proven unmet demand in a specific submarket, not to hit a capital deployment target. The firm prioritizes delivering into markets with the strongest unmet demand, avoids overbuilding individual parks, and will only accelerate starts when consistent development lease signings are sustained. Currently, there is unmet demand for very large format (over 1 million square foot) properties, which the firm is evaluating for potential new starts. (446 characters)

Q: The 39% year-to-date cash rental spread is very strong; what is driving this outperformance, and how do you expect spreads to trend over the next 2-3 years? / A: Management attributes the strong spreads to the firm's long-term strategy of owning high-quality, newer product in the right supply-constrained markets. While spreads have ticked down from the peak 58% reached a few years ago as market rent growth moderated, the portfolio's concentration in recently updated/developed properties and high-barrier markets supports continued strong rental spreads. CAGR for rental rates in high-demand markets like Southern California remains in the 11-12% range over the last 5-6 years, even after the market correction, and the eastern US markets have held rental values more steadily, supporting sustained strong spread performance. (452 characters)