Hamid Moghadam: By the way, banks are a lot more disciplined, because now they have risk-based capital requirements. So putting out a lot of construction loans on buildings that don’t lease like used to happen in prior cycles less likely to happen. So I think the market is generally smarter. There’s a lot more data. Conversations like we are having today never used to take place two decades ago. So the cycles were much more amplified. I think it’s pretty hard for that to happen. But something can come out of left field. I am not discounting that possibility. Something really bad to come out of left field and change all this, but I just can’t think of what that thing would be. But none of us predicted the pandemic I don’t think. So things can happen.
Operator: Thank you. And our next question comes from Vince Tibone with Green Street. Please state your question.
Vince Tibone: Hi. Thanks for taking my follow-up. I just want to get any color on recent market rent growth and how that may differ between suite size, like are you seeing any differences in performance between bulk buildings and smaller more infill facilities?
Hamid Moghadam: I would generally tell you that the smaller spaces are having a tougher time to the extent of anybody having a tougher time, but Chris is looking up the specific. They are not radically different, but why don’t we do this, why don’t we go to the next — you got it.
Chris Caton: Okay.
Hamid Moghadam: Yeah.
Chris Caton: Right. No. Glad to help you out here. First off, market rent growth had great momentum at the end of the year with 5% growth in the U.S., 3% in Europe. When we look at rent change, which is a great way to understand performance in suite size, it’s strong across the board. But in fact, late in the year, we saw an improvement in those smaller units, when — which might be where you are your question is coming from, so it
Hamid Moghadam: Oh! Yeah.
Chris Caton: adverse.
Hamid Moghadam: Okay. That’s different than I would have guessed and I bet you it’s because there was more available space to absorb in those categories. Those categories were less leased. And by the way, we have them, too. I mean we have some smaller than 100,000 square foot unit. So I would say, occupancy was a little bit lower, so there was more room to lease product at the higher end.
Chris Caton: If we flip it to submarkets and we look at, say, infill which tend to have those smaller units, infill outperformed in the U.S. by 500 — 400 basis points last year, so say, 34% and in the U.S. in the infill submarkets versus 30% for the whole of the United States.
Operator: And our next question comes from Jamie Feldman with Wells Fargo. Please state your question.
Jamie Feldman: Great. Thank you. Just a quick follow-up from Blaine and myself. So where do you expect to make the most progress on the Essentials business in 2023 and how does that factor into your guidance and earnings? And then also if you could just say where you think cap rates are today versus the peak of the cycle, how much they have moved? Thank you.
