Howard Schwimmer and Michael Frankel, co-CEOs of Rexford Industrial Realty Inc. (NYSE: REXR), joined REIT.com for a CEO Spotlight video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas.
Rexford has increased the square footage of its Southern California-based portfolio by 21 percent since the beginning of 2015. Schwimmer discussed what has been driving the activity.
He explained that since the company’s initial public offering (IPO) in 2013, about 72 percent of transactions have involved properties that were either lightly marketed or off-market. Rexford is able to tap into this market due to its proprietary research and deep, long-term broker relationships, Schwimmer said.
At the same time, about 27 percent of the properties Rexford buys reflect a “generational ownership shift,” Schwimmer noted. He pointed out that much of the infill product that Rexford focuses on was developed in the post-World War II era; many of the heirs of those original developers do not want to hold onto the property, creating opportunities for Rexford.
Frankel, meanwhile, stressed that demand is growing in Rexford’s markets as supply remains scarce.
Overall, Rexford’s infill markets are about 2 percent vacant, he said. In Rexford’s large sub-markets, the vacancy rate drops to around 1 percent.
“We have an extreme scarcity of available product,” Frankel said. The number one issue for tenants is being able to find any space at all in infill markets, he added.
Frankel noted that the impact of e-commerce on tenant demand has been “substantial.”
“For every Amazon that’s out there, there are thousands of other companies that are e-commerce driven or enabled,” Frankel said. Furthermore, the push for same-day delivery is driving the need for tenants to locate their warehouses ever closer to the end points of distribution, he added.
As for Rexford’s leasing outlook, Frankel observed that to the extent that rental rate growth reflects tenant demand and the health of the small and mid-sized segment of the economy, “then things are going very well.”