Craig Mailman: And I guess that was my other question. Is this — should we take this the indication of your concern about overbuilding in Phoenix? And doing this deal rather than building it out industrial legs, it seems to have been a good market for you guys since you got involved in it a few years ago.
Peter Baccile: This in no way is an indication of our confidence in that market. We spent a lot of time deliberating whether we wanted to do this. At the end of the day, the economics of this trade pretty much equal the economics of building that site up.
Craig Mailman: And then just 1 quick follow-up or a separate question. Just Scott, on the mark-to-market, you said you’re not giving guidance yet on spreads. But you anticipate next year, it won’t be in excess of that 38%. Is the 40% you leased this year just a mix issue of — outside of L.A. or other markets with smaller mark-to-market? Just give details of maybe what’s net 40 versus what’s remaining in the 60 from a market exposure?
Peter Baccile: Chris, do you want to take that?
Chris Schneider: Yes, Craig, this is Chris. Yes, it is definitely a mix issue. So if you look at what’s been taken care of, it’s only 6% from Southern California. If you look at the rest of the 2024 rollovers, that mix is 56% coming from Southern California.
Operator: [Operator Instructions] Our next question comes from Vikram Malhotra with Mizuho.
Vikram Malhotra: Just first following up on development. I guess some of your peers may be seeing this as — if development starts are very low, by the end of ’24, there’s probably a little product to offer. And if demand is sort of picking up and there’s probably share to be had. So I’m just wondering how do you balance the 2 other specific markets you can cite where you do feel you might pause in 4Q like you said but then ramp back up because in general, there will be a dearth of quality product?
Peter Baccile: Yes. I mean 1 of the big indicator for all of us is going to be development lease-up and we have product in the market now. We’re having good conversations. As we’ve said in various in many different ways, tenants are taking a while. To lease a 500,000-square foot building, that’s about a $50 million decision. And the current economic outlook and what’s going on around the world, that causes people to pause before they put down that $50 million. So yes, it’s possible that toward the end of next year, there’s not enough supply. That would be fine by us, obviously. And we really think that the market will be particularly strong in 2025. So with respect to us looking at what we’re going to start to potentially start next year, it really is going to depend upon how we feel about lease-up.
Vikram Malhotra: Okay, that makes sense. And just following up on the Inland Empire comments you made around the competitive set being small in terms of your project. Maybe just help us think about how you’re seeing what you’ve seen in terms of market rent growth in SoCal in general, what the variability in that region looks like quarter-over-quarter? Any numbers you can share would be helpful.
Peter Baccile: Jojo?
Jojo Yap: Yes. So kind of address it a little bit because of the low vacancy L.A. of sub-2. And then i.e., at about 3.5. Long term, we would think that it would be minimum mid-single digits going forward. But today, as you may recall, SoCal the highest rent growth of any market in the U.S. for the last 3 years straight. So right now, what the market is doing is digesting the supply in the marketplace, along with a little bit of a decline on the inbound TEUs that affected the demand. And I’m not going to be surprised. We’re not going to be surprised. In the very near term, the rent is flat through the end of the year and maybe first quarter next year to maybe slightly negative. But that doesn’t mean that we can’t create value because I’d point out to you, our developments, for example, just a subset, it’s about a 93, based on current market trends, rent to yield.
