Jay Poskitt: Hey, thanks. Good morning. I was wondering, if you could just provide a little bit of commentary on the supply and demand trends over the next couple of quarters. You previously said that you think deliveries will outpace demand for the next couple of quarters and then the inverse will happen after that. So just any update on that would be great.
Chris Caton: Hi, Jay. It’s Chris Caton. So we project 250 million square feet of net absorption in the calendar year and 285 million square feet of completions. And yeah, that’s going to be front-end loaded, particularly on the supply side. And so we think you’ll see the vacancy rate rise by another 50 basis points to 75 basis points here in the first half of the year, peaking at 6% maybe 6.1%, and then making a meaningful move through the subsequent rest of the year and into 2025 and 2026 based on the trend in starts that we’ve profiled for you.
Tim Arndt: Let me just punctuate that, the vacancy rates will go up through the second quarter. So don’t be surprised by that. But we’re pretty confident they’ll come back down after that.
Operator: And the next question comes from the line of Nicholas Yulico with Scotiabank. Please proceed with your question.
Nicholas Yulico: Thanks. I just wanted to go back to the space utilization comment you made, Tim, about feeling that at this point retailers like we have to restock inventories. So this is actually a good sign where space utilization is. I guess, I’m wondering, if you could give us some reminder sort of seasonally how this may play out historically in terms of leasing demand picking up from 3PL or retailers because of that issue of restocking? And then, as well in terms of the lease proposals picking up in the fourth quarter, if you had any benefit already from that industry, or even anecdotally, you could talk a little bit about the discussions there. Thanks.
Tim Arndt: Yeah. So the easy way of thinking about this is — is this — basically absorption and demand for our product follows a one, two, three, four scenario, as you move through the quarters, it’s back end loaded towards the fourth quarter. And that’s historically been the relationship because so much of the activity occurs in the fourth quarter and so much of that activity would have been based on anticipation laid earlier in terms of the Christmas season, so much of the sales are in the Christmas season, that volatility is the most in the fourth quarter. This year, our retail sales and in particular e-com sales were better than people’s expectations. And the retailers were cut short in ’21, they were a little overstocked in ’22 and now they were back to being very careful with inventories.
So they got cut in short of inventories again. That’s why utilization is done. They’re schizophrenic. They always have too much or too little. You can never get it right. And the good news is that this Christmas season was stronger than everybody anticipated. It’s going to take for that to work its way back to normal.
Operator: And the next question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question.
Blaine Heck: Great. Thanks. Can you just talk broadly about valuations in cap rates? And given the continued movement in the 10 year, I guess, do you think that pricing is adjusted correctly or could we see continued volatility in the near term? And I guess does that potential volatility present you with any investment opportunities?
Tim Arndt: Yeah. We don’t think the real pricing and real returns have really changed because a return expectation should have been higher six months ago because the higher treasury rates. But nobody was trading based on those higher return requirements. So nothing really happened. So it was a theoretical decline in values. I think with the treasuries now having come down, I know they’ve gone up a little bit just most recently, but net-net, they’re down. I think the reality is the expectations of the market participants and the theoretical pricing of assets is converging. Bottom line, we think we’re seeing the near bottom valuations, both in the U.S. and Europe. And I think with this level of stability and sort of bottom forming, you’ll see more volume coming through in terms of real deals.
Operator: And the next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.
Michael Goldsmith: Good afternoon. Thanks a lot for taking my question. Another supply demand question, but just as we think about the cliff of new deliveries coming online, it sounds like that, that drops off in the second quarter. Is there an extended period of time where we’re going to need to lease these up? And so the inflection when supply gets better and then combined with what you’re seeing on the demand side, does that mean that — does that happen through the third quarter and into the fourth quarter, or is that kind of happening just as soon as the deliveries slow? Thanks.
Chris Caton: Hi. It’s Chris. So I’ll start off by offering, look, the vacancy rate is going to go up to 6%. Hamid and I are very clear or the whole team is clear on that. Bear in mind that’s a very low level in the context of history. And so, yes, it will take — there’ll be time for vacancy to decline to soak up that availability, but it’s going from a low level to an even lower level. So it’s a bit like the vacancy rate is going to go from 6%, it’s going to move to 5.5% and likely to 5%, given the supply cliff that we see.
Operator: And the next question comes from the line of Camille Bonnel with Bank of America. Please proceed with your question.
