Marshall Loeb: Okay. Thanks, Bill.
Staci Tyler: Thanks.
Operator: Your next question comes from Samir Khanal of Evercore. Your line is already open.
Samir Khanal: Thank you. Hey. Marshall. Can you provide a bit more color on California? When I looked at the page where you provided the market breakdown looking at San Francisco NOI growth slowed considerably. And then I guess just expand on kind of what you’re seeing in Southern California as well in L.A. and San Diego. Thanks.
Marshall Loeb: Sure. Hi. Good morning, Samir. I would say, San Francisco we’ve had — and we’ve got — we had some vacancy there. We had a value add we bought that’s now 100% leased. But it took us a little bit longer than we had hoped to get that — it’s a 60,000 foot vacancy to get that put to bed. And then, in the Tulloch portfolio there was a 3PL that left. We’ve got about half of that space leased now and activity on the balance. But that’s — is really vacant. That’s what impacted our same-store or pulled our growth down and occupancy down in San Francisco. It has — both of those markets maybe a little bit more San Francisco and L.A. they’ve been great historically. And those are markets where you watch, and it certainly had a lot of layoffs in technology in the Bay Area.
It feels like it’s stabilized. We’re not really in the city. What we read is this kind of reading through it the city stats are not great. We’re in East Bay and in the North Shore North Bay market. Those have been a little more stable. And then in L.A., it feels there especially as you get into the Inland Empire. And we’re not in the Inland Empire East. We have some in the Inland Empire West and some in South Bay which is the ports and mid-counties markets. That it was so red hot it really got out almost like you get out over your skis. And then a lot of the 3PLs have given space back and rents have come backwards. They ran up they more than doubled. And now they’re retreating a little bit and kind of finding stability we think in those markets.
Thankfully, we’ve been full and we’ve really — it’s been more hearing and reading about L.A. than really impacting our portfolio. We have a couple of spaces turning this year in L.A. not a lot. But for us it’s about 6% of our NOI that we’ll address. But that market if you said which ones that we’re in feel like they’ve had the most instability it’s that one. But it’s probably, because we’ve — I — it as we look at our own thing it’s something that takes off like a rocket usually lands about as gracefully as a rocket. So it was one of the hottest markets. And that’s why we like diversity in geography and we like diversity in our Tenant base too. Look, we enjoy the run-up but it makes you a little nervous when things turn there’s no — we can go to Florida, right and buildings or lease and do things like that.
San Diego has been stable throughout. We like San Diego a lot. That’s been the most stable of the three markets. We’d love to find the next value creation opportunity there. In the Bay Area we just need to get the space leased. But I’ll admit it’s taken a little bit longer than I historically would have thought that those markets maybe have gone I don’t know I’ve talk to one of our peers who were saying they’ve gone from good to great maybe — or great to good in those markets.
Samir Khanal: Got it. And then I guess just a second question on maybe development starts. I mean you did talk about supply coming down right in the second half which is similar to what your peers have stated. So I mean could we see you ramp up your development starts? I mean how are you thinking about that?
Marshall Loeb: Yes, I hope so. And if it’s helpful maybe two slides I’ll mention. Here’s what the danger. I wish it was a Zoom call rather than a call. On Page 10 of — if you go to our kind of Investor Relations, our slide deck starts. So people can look. And that’s all sizes. But that will show you kind of how fast they’ve come down the last year plus now. And I expect first quarter to look similar to fourth quarter last year. It won’t be much of a pickup. So, there’s — when people do come back the shelves of the store are going to be pretty empty. And then on Page 12 is really the vacancy by size range. And to me that — these are both CBRE slides by the way. That’s pretty impactful where you can see the supply that has not gotten absorbed over the past year, it’s really in the big box space that the shallow bay is still pretty full and our starts have come down as much if maybe not more because it’s less institutional.
So, where we’ve modeled our starts and I think we’re being prudent, when we see people moving deliberately, we’ll go as fast or as slow as kind of the field dictates on our starts. We’ve modeled $300 million. We’ve modeled it more towards the back end of the year. That’s really heavier for starts. And as Staci mentioned that cost us about $0.05 in earnings which isn’t fun. I mean at least they’ll hit our G&A, but we think it’s the right — it’s a long-term business that’s the prudent business decision. And I think — certainly if people feel better about the economy and want space, we’ll try to get inventory on the shelves as quickly as we can. That’s why we like having our long-standing relationships with the general contractors, having the permits in hand, having the GCs everything ready to go.
And I like about industrial compared to some other product types that we can deliver it pretty quickly. And certainly in this environment because I think there’ll be a lag effect for supply to catch up for demand by several quarters and that’s where I hope that should be a good we need to capitalize on it but that should be a really good opportunity for our company.
Samir Khanal: Thank you.
Marshall Loeb: Sure. You’re welcome.
Operator: Your next question comes from Vincent Tibone of Green Street. Your line is already open.
Vincent Tibone: Hi, good morning. I’d like to keep the dialogue going on just the broader supply landscape. So, just within your markets, what percentage of new supply do you estimate to be light industrial and competitive with your portfolio? And then also are there any markets where you’re concerned about overbuilding and potentially market rent declines for your type of building in the near-term?
Marshall Loeb: Yes. Hey Vince, good morning. We typically — we’ll say and I don’t think that was any aberration 10% to 15% of supply is competitive supply. Because although we get questions of can they break up a big box for more shallow bay, really the dimensions and it almost helps if we had an architect plan in front of us those spaces get awfully long, awfully narrow, and awfully expensive for those landlords. So, the loading — the runs for the forklifts get awfully long, the loading you get two doors rather than 10 doors dock-loading doors and things like that. So, 10% to 15%. And the markets where we’re watching besides L.A. that I mentioned earlier that we’re watching supply the most would be Austin and Phoenix. That there’s a little bit of supply.
We’ve got good sites there. And that’s maybe where we’ve pulled back on starts and inputs welcome. I’ve kind of said in case I’m wrong, it’s me that I’d rather be one quarter to two late than one quarter to two early. So, we’re going to try to let some of the supply that’s out there clear the market. And then I think there’ll be calm and again will take us months to a year to deliver. So, it’s not — we’re not putting the space on the shelves today. But when do we pull the trigger. We’ve got sites that are really like long-term in both markets. But we’ve said, let’s be a little bit — I never want the team in the field to feel pressure from corporate to have a start to let’s be patient and watch it and we’re watching it closely. And as the inventory gets absorbed how fast do we go?
I’ve not seen rents come backwards in any market other than L.A. right now. That’s the only one I’m aware of that I’d say where I’ve seen rents actually turn, and especially turn in our product type because the vacancy is thankfully less — a lower rate than in the big box.
Vincent Tibone: That’s all really helpful color. Appreciate that. I just have one quick follow-up on the same-store guide. Are you able to provide cash releasing spreads that are assumed within 2024 guidance?
Marshall Loeb: We really have not. One because we haven’t been all that accurate, and I have not disclosed that. I think last year, maybe two parts to same-store. Thankfully, our same-store occupancy and this is in our supplement was 98.4%. So I think it will be a good number. We’ve budgeted 97%. So a good number. It’s just coming off what I think is a record. And I would expect re-leasing spreads. I think the rent growth will moderate this year. I think it’ll still be positive, but will moderate. But I think with our embedded growth, I would expect our re-leasing spreads to be similar. They actually on a GAAP basis got better. Each quarter was better last year for us. I don’t see that trend changing materially this year. And so the cash re-leasing should follow — or will follow that as well. And that’s without saying a number that’s probably pretty much what we’ve modeled maybe a hair below it just in case it does moderate some.
Vincent Tibone: That’s perfect. Thank you so much.
Marshall Loeb: You’re welcome.
Operator: Your next question comes from Ki Bin Kim of Truist. Your line is already open.
Ki Bin Kim: Thank you. And Congratulations Staci.
