Dan Letter: Yeah. Thanks. This is Dan. I’ll — I got a couple of thoughts on that point there around development starts. We adjusted our guidance on development consistent with the adjustment in the occupancy and the operating pool. So as we see demand shifting out, we just expect that we are going to start fewer buildings. We reduced it by about $0.5 billion. That’s about half build-to-suit, half spec. We are raising the bar on spec. As Hamid said earlier, we put that guidance out there because you ask for it. We don’t need to start these projects. We own the land. We have $38 billion worth of opportunity embedded in that land bank. We have entitlements. We have the teams. They’re all geared up, ready to start. We can literally pull the trigger on $10 billion, $12 billion of that tomorrow.
So we just look at that. We are just trying to be consistent and tie it to our overall outlook on demand. And there’s no particular location or otherwise that we — that drag that down.
Hamid Moghadam: Yeah. And the only thing I would add to that is that even though we made the adjustment on both the built-to-suit and the spec part, the bias is greater on the spec part. We actually feel pretty good about our built-to-suit volume going forward. So it’s really the spec which is discretionary, and we can, as Dan said, write that at any time.
Operator: And the next question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question.
Blaine Heck: Great. Thanks. So you’ve called out Southern California as being soft again. Can you just talk about any specific segments of the market that are particularly weak whether that’s by submarket or size? And what makes you confident in the recovery even as it seems it might be delayed kind of relative to your original expectations? And secondly, just curious if you can expand on which other high-rent markets might be weighing on the outlook. Thanks.
Chris Caton: Hey, Blaine, it’s Chris Caton. Thanks for the question. So Southern California is a market that continues to soften, vacancy rates are continuing to rise, yes, after different submarkets. The softest area of Southern California is midsized and smaller units in the Inland Empire. The strongest area is probably Orange County. And Los Angeles, while subdued, has a 4% market vacancy rate, so as demand comes into that marketplace, bear in mind, demand has been negative over the last year, a very rare occurrence, as demand comes back in that marketplace, you’re likely to see the vacancy rate make a difference in Los Angeles as well. In terms of other markets where we’re watchful, the soft markets in the US include New Jersey, Seattle and Savannah.
Hamid Moghadam: Yes. The other thing I would say about Southern California is that don’t discount the effect of the port labor issue that was resolved. That took longer, a lot longer than most people thought. And that affects a lot of the people — a lot of the users in the South Bay immediately adjacent to the ports and the like. So that market can get tight real quick if that port volume comes back. I think that the small to medium spaces in the Inland Empire are kind of a mismatch. They’re, by and large, the older buildings that were built there when the market was not really designed for the big 500,000 million square foot buildings. And those are — somebody who wants a lot of space has to go to the Inland Empire. Somebody who wants 100,000 to 200,000 feet has more choices. So that’s where the softness is in the Inland Empire.
Operator: And the next question comes from the line of Vince Tibone with Green Street. Please proceed with your question.
Vince Tibone: Hi. Good morning. Could you discuss the markets of relative strength in your portfolio in terms of demand and market rents? And also, are you seeing any different levels of demand by building size, more broadly? We noticed that occupancy fell the most on a sequential basis, for buildings less than 100,000 square feet, but actually grew for buildings 250,000 to 500,000. So just curious if those trends on occupancy are kind of a fair representation of the demand profile today.
Chris Caton: Hi, Vince. It’s Chris Caton here. So first, in terms of strength, there is a wide range. And speaking of the benefits of diversity, the strongest markets in the world include Mexico, Texas, parts of the Southeast US, Pennsylvania, but also looking out to the Netherlands, Germany and Brazil, Toronto as well, as a strong market. You also have stable markets, Chicago, Southern Florida, Baltimore, D.C. And then really at Southern California alone is really the main weak market. So that would be the range. In terms of size categories, what you see — what you hear in the marketplace in terms of tours and, in fact, some leases that are getting made, is there’s a bit more activity, particularly among self-performing e-com and retailers at the larger end of the spectrum. That would be the main, I’d say, new news in the last 90 days.
Operator: And the next question comes from the line of Ki Bin Kim with Truist Securities. Please proceed with your question
Ki Bin Kim: Thanks and good morning. So going back to your comments about the softer environment. I’m curious if you’ve seen any changes in CapEx or concessions that might be — that might not be so apparent in the headline face rents. And second question, going back to your comments on strategic capital. Where do you think cap rates are selling out at for good assets and good markets? And does that change your view on the level of contributions that you might make going forward? Thank you.
Tim Arndt: Hey, Ki Bin, it’s Tim. I’ll take the front half of your question just on free rent. We have seen an increase in free rent. I think what’s important to remember there is we’ve had exceedingly low amounts of free rent granted in the last few years. And I would say the current rates that we’ve seen in this last quarter, and what we’re bracing forward this year, would still not really be on par with long-term averages. I would say that concession is not fully back to normal. But it is turning up logically in this environment.
