Hamid Moghadam: Okay. Let me start. I am sure Chris can give much more color. I would state this, in 40 years ago on this, this is the biggest disconnect that I have seen between the macro economy and the prospects for our business. Usually, those things — two things are much more aligned and this time around, they just appear to be completely disconnected for a variety of reasons that we talked about at nauseam. So I think where pricing goes away is, vacancy is going to 7% to 8% and staying there. And if you do the math on that, you need another in the U.S., I don’t know, 2 billion, 3 billion square feet of unleased construction coming online and you can’t do it overnight, maybe 1 billion something median. We can do the math.
But it’s a big number and you are not going to keep doing that if space that — if the first 100 million feet doesn’t lease, you are not going to do that. And by the way, this cycle, you have a couple of big players in the business that have much more to gain from the fundamentals of the business being stronger, rents being stronger than a few bucks they may make on additional development. So there is an economic incentive to be disciplined. In prior cycles, mostly driven by merchant builders and private developers, they don’t really care what their rental market was. They just wanted to build the product and sell to somebody else and that will be their problem. Today, those two sites are connected to one another. So I think that the motivations are really different and absent the nuclear work type of scenario.
I just don’t see vacancy rates going to a level that will lead to a reduction in rents. It’s either going to be a demand collapse or a supply explosion and I don’t see either one of them happening. The other thing I would say is that we are — we leased 1 million square feet on a daily basis. Just — let’s get our heads around that, 1 million square feet on a daily basis. We throw these big numbers around without really fully appreciating what the scale of that is. I mean that is 10x the amount of space than anybody else in leases in any sector in real estate. So by watching these customers and their behavior, obviously, we will figure out if some back stuff is about to happen and won’t be waiting for the quarterly report to analyze that. So, Chris, do you have specifics?
Chris Caton: Yeah. A couple of specifics, I would lead with our proprietary data leads us to these conclusions. So for example, our sales force pipeline, if we look at the vacancy that we do have, 46% has deals working. That’s in line or above the average that we have experienced through COVID to say nothing of the conversations that Mike and Scott and our customer led solutions team have. In terms of public data, which I think I heard you ask about, Craig. We do publish our IBI survey and our utilization data and so figures like 60, on our IVI, it’s a diffusion index. So that’s consistent with this good or great tone that the team has struck and 86% on utilization, which was discussed earlier are ways that you can see that in the marketplace.
And then as it relates to what it would take for rents to fall, Hamid described it very specifically. And I’d add one piece of data that, I don’t see commonly discussed in the marketplace, but it’s important to know, which is development starts rather than development completions. Starts in the U.S. were off by a third in the fourth quarter relative to their 2022 trend and on the Continental Europe, they were off by 45%. So we are seeing a sharp marking to market at the capital market environment, the valuation environment and what those buildings might be worth for some of those other folks building buildings.
