First Industrial Realty Trust NYSE: FR reported first-quarter 2026 Nareit funds from operations (FFO) of $0.68 per fully diluted share, unchanged from the same period a year earlier, as the industrial REIT highlighted continued progress on lease rollovers, development leasing activity, and a pending land sale in Phoenix that management said will generate meaningful value.
Market conditions and portfolio occupancy
President and CEO Peter Baccile said industrial fundamentals “continued to steady” during the quarter. Citing CBRE data, Baccile noted national vacancy was stable at 6.7% at quarter end, with net absorption of 43 million square feet compared to 55 million square feet of new deliveries. He added that new supply remained “disciplined,” with muted starts of 39 million square feet and a national construction pipeline of 237 million square feet that is 39% pre-leased.
Within First Industrial’s portfolio, Baccile said touring activity has increased for available space, and decision-making has accelerated for spaces under 200,000 square feet within the company’s development portfolio. He also said management has not seen “any discernible impact to leasing activity” from potential economic and demand consequences tied to conflict in the Middle East, while noting it remains a risk to monitor.
In-service occupancy was 94.3% at quarter end, which management said was in line with expectations.
Leasing: rollover progress and development wins
First Industrial reported further progress addressing 2026 lease expirations. Baccile said the company has now “taken care of 61%” of 2026 rollovers by square footage, and that overall cash rental rate increases for new and renewal leasing were 41%.
A key highlight was a renewal of the company’s “largest remaining 2026 expiration,” a 556,000-square-foot building in Southern California. Baccile said the cash rental rate change on that renewal “significantly exceeded the top end” of the company’s annual guidance range of 40%. Chief Investment Officer Jojo Yap declined to provide detailed lease economics on the call but characterized it as a “long-term” renewal and confirmed the cash rent change was “up more than 40%.”
On development leasing, management said it signed 383,000 square feet across multiple markets, including a full-building lease at the 155,000-square-foot First Wilson II project in the Inland Empire. The company also executed several leases under 100,000 square feet in Chicago, South Florida, Central Florida, and Central Pennsylvania. In the Lehigh Valley, First Industrial leased a 54,000-square-foot space at the recently completed first phase of First Park 33.
During the question-and-answer session, Baccile told Citi’s Craig Mailman that improved activity appears to be driven primarily by “broader industrial demand,” with 3PLs remaining active and manufacturing picking up, including “data center, tech, aerospace, etc.” Management said data center-related activity has helped “on the margin” by increasing the cost of waiting for tenants, but Baccile said it has not “created a wave of new lease signings.” Yap added that tenants supporting data center infrastructure—such as switchgear, semiconductors, and electrical supply—can drive incremental warehouse demand, though she said those users were not among the top tenant categories in the first quarter.
Financial results: FFO impacted by advisory and G&A items
Chief Financial Officer Scott Musil said first-quarter 2026 Nareit FFO was $0.68 per share, and that results were negatively impacted by $0.04 per share of advisory costs related to a contested proxy campaign initiated by Land & Buildings. Excluding those costs, Musil said FFO was $0.72 per share.
Musil also pointed to higher general and administrative expenses tied to “accelerated expense related to an accounting rule” requiring the company to fully expense the value of granted equity-based compensation for certain tenured employees.
Cash same-store NOI growth for the quarter, excluding termination fees, was 8.7%. Musil said the increase was driven primarily by higher rental rates on new and renewal leases, lower free rent, and contractual rent escalations, partially offset by lower average occupancy.
During the quarter, approximately 2.4 million square feet of leases commenced, including 300,000 square feet of new leases, 2.0 million square feet of renewals, and 100,000 square feet tied to developments and acquisitions with lease-up, Musil said.
Guidance update and Phoenix land sale
Musil said full-year 2026 Nareit FFO guidance is now $3.05 to $3.15 per share, reflecting $0.04 per share of incremental advisory costs related to the Land & Buildings proxy contest. He added that the company’s 2026 FFO guidance range absent the advisory costs—$3.09 to $3.19 per share—was unchanged from the prior update.
Management’s other major operating assumptions included:
- Average quarter-end in-service occupancy: 94% to 95%, reflecting approximately 1.3 million square feet of incremental development leasing and the 708,000-square-foot Central Pennsylvania vacancy expected to occur in the second half of the year.
- Cash same-store NOI growth (before termination fees): 5% to 6%.
- Capitalized interest: approximately $0.08 per share for the full year.
- G&A expense: $42 million to $43 million, excluding $5.6 million of incremental advisory costs related to the proxy contest.
Musil said guidance assumes a previously announced Phoenix land sale will close in June. Baccile provided additional detail, stating the ground lessee of 100 acres in the “303 corridor” exercised an option to purchase the site for $131 million. Baccile said the proceeds equate to about $30 per land square foot, which he described as “more than three times industrial land values in that market.”
Asked about the economics, Musil said the parcel is on the company’s balance sheet and that the company disclosed a cap rate of about 5.3% in its supplemental materials. He described the rent as “a great rent” when the land was leased “back a couple of years ago.” Musil also said the land sale creates “slight dilution” in guidance because it is a leased parcel and the company assumes proceeds will be used to pay down its line of credit.
On the broader land bank, Baccile said management has reviewed all assets and narrowed potential value-enhancement opportunities to “about a handful,” noting efforts are underway to secure power, which he described as a lengthy process that could add value above industrial use if successful.
Tenant updates, development pipeline commentary, and capital allocation
Musil updated investors on a 3PL tenant on the company’s credit watch list, saying First Industrial reached an agreement that required a lump-sum payment of approximately 60% of the balance owed as of Dec. 31, 2025, which was received in March. The agreement also includes scheduled payments to pay off remaining past-due rent by the end of 2026. Musil said the situation had “no impact to FFO or same store” because the company believed the rent was collectible and did not reserve it in 2025.
On another tenant topic, Musil said Boohoo remained current on rent, paying “right at the end of the month every month.” Executive Vice President Peter Schultz added that Boohoo continues to market its building for sublease, and he pointed to a “declining number” of available million-square-foot-plus buildings in Pennsylvania. Schultz said activity for large space remains strong, adding that “Amazon is about to ink two more million square foot plus buildings in Pennsylvania” as of the day of the call.
Regarding market-by-market conditions, Schultz said Pennsylvania is among the company’s most active markets across a range of tenant sizes, while Denver has seen slower decision-making from larger users despite limited competitive supply; mid-size tenant activity in Denver remains active, he said. Schultz also cited “good activity in South Florida” and said Nashville activity is “a little less” than prior years but supply remains tight. Yap said Dallas, Houston, and Phoenix have shown significant gross leasing since the second half of 2025, and that gross leasing in the Inland Empire has been positive quarter-over-quarter, though she noted abundant availability in the 200,000- to 400,000-square-foot range.
Management said it continues to evaluate new development starts but is mindful of market conditions and concentration. Baccile said the company is focused on markets including Dallas, Delaware (which he described as a South Philadelphia submarket), the Lehigh Valley, South Florida, and other markets where it has been active, while indicating Southern California is not a near-term development start market due to available space there.
On capital allocation, Baccile said speculative development remains the “primary driver” of growth, with the company also pursuing acquisitions of cash-flowing buildings. He said historically the majority of capital has gone to development, with roughly 20% to 25% into cash-flowing buildings. Baccile also discussed the company’s share repurchase authorization, saying management believes dislocations that pressure the share price below long-term fundamentals can create value-enhancing opportunities to buy back stock, citing periods such as COVID and April 2022 when Amazon announced a pullback.
First Industrial also reminded investors of upcoming property tours: an Inland Empire portfolio tour on May 12 and a Central New Jersey tour on June 4.
About First Industrial Realty Trust NYSE: FR
First Industrial Realty Trust, Inc NYSE: FR is a publicly traded real estate investment trust focused on the ownership, operation and development of industrial real estate assets. The company specializes in light industrial, warehouse and distribution facilities that serve a broad range of end markets, including manufacturing, transportation and e-commerce. Through both acquisitions and ground-up developments, First Industrial seeks to assemble a diversified portfolio of strategically located properties that support its tenants' supply-chain needs.
Core services provided by First Industrial include property leasing, asset management, redevelopment of obsolescent buildings and build-to-suit development for creditworthy users.
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