Rexford Industrial Realty: Navigating Challenges and Embracing Change in 2025

Rexford Industrial Realty (NYSE: REXR), a prominent player in Southern California’s industrial real estate market, demonstrated resilience in 2025, reporting a notable 9.2% increase in core funds from operations (FFO) to reach $558.6 million. This growth translated to core FFO per diluted share of $2.40, marking the high end of the company’s initial guidance. The numbers reflected a strong fourth quarter, with year-over-year revenue rising 17.5% to $264.4 million. However, beneath this performance lies a significant transformation as the company shifts strategies under new leadership, faces activist investor pressure, and responds to a cooling industrial market characterized by rising vacancies and declining rents.

Leadership Transition: A New Direction

The fourth quarter of 2025 was pivotal for Rexford, particularly with the transition of leadership. Co-founders Howard Schwimmer and Michael Frankel stepped back, leaving the spotlight to Chief Operating Officer Laura Clark, who is set to become the CEO on April 1, 2026. This change coincides with increased scrutiny from activist investor Elliott Investment Management, which holds a substantial stake in the REIT. Clark emphasized a renewed commitment to maximizing risk-adjusted returns as part of a strategic overhaul. The company recognized significant costs associated with leadership transition and impairment charges on underperforming development projects, but these challenges are seen as necessary steps towards long-term value creation.

Market Trends: Softening Conditions in Southern California

The company’s performance unfolded amid notable shifts in the Southern California industrial market. Fourth-quarter data revealed a rise in the Los Angeles industrial vacancy rate to 4.6%, marking the highest level observed in the past decade. While net absorption remained negative, it also reflected the lowest negative reading in two years. Orange County experienced its twelfth consecutive quarter of rising vacancy, reaching 5.0%. Although rents have softened significantly, with a 1% decline quarter-over-quarter reported in the company’s portfolio, management noted signs of stabilization in demand, particularly for smaller spaces and property types that meet current market needs.

From Buyer to Seller: A Strategic Pivot

Rexford’s strategic pivot from acquisitions to a programmatic disposition strategy is a defining feature of its 2025 narrative. After years of aggressive acquisition—investing more than $1 billion annually—the company made no new acquisitions in the fourth quarter. Instead, it executed the sale of seven properties totaling 589,534 square feet across California for approximately $217.5 million. This shift aligns with the need for capital reallocation and streamlining operations. As the company targets $400 million to $500 million in dispositions for 2026, management is optimistic about utilizing these proceeds to enhance shareholder value through share repurchases and strategic reinvestments.

Financial Health and Capital Allocation Strategies

Rexford concluded 2025 with a robust capital position, boasting $1.4 billion in total liquidity, comprising $165.8 million in cash and $1.245 billion available on its revolving credit facility. This financial flexibility enables the company to navigate challenges while pursuing strategic opportunities. The capital allocation strategy for 2026 projects approximately $203 million in development and repositioning spend, leveraging its liquidity to optimize risk-adjusted returns. Management is committed to ensuring that available cash is deployed wisely, balancing shareholder returns with operational improvements.

Looking Ahead: Balancing Caution and Confidence

The outlook for 2026 reflects cautious optimism. Despite the prevailing market headwinds, Clark noted the company’s portfolio continues to outperform broader market trends in Southern California. Yet, the potential for recovery hinges on various factors, including vacancy trends, the successful conversion of the disposition pipeline into deployable capital, and the new leadership team’s ability to implement operational efficiencies. As Rexford Industrial Realty embarks on this transformative journey, the focus remains on adapting to changes while delivering long-term value and confidence to its stakeholders.

In conclusion, Rexford Industrial Realty exemplifies a company poised to navigate the complexities of an evolving market landscape. With strategic shifts in leadership and operational focus, the REIT is well-equipped to turn challenges into opportunities, ensuring sustainable growth in the long term.