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Peter Baccile

Thank you, Art, and thank you all for joining us today. The First Industrial team wrapped up a successful 2024 highlighted by delivering strong cash rental rate growth on leasing and achieving our second highest volume year for development lease signing since we relaunched our program in 2012. We're equally excited about the impact this success is having on our 2025 FFO growth. Based on the midpoint of our guidance, we're expecting to grow FFO approximately 10%. Scott will walk you through the details later when he addresses our guidance.
Before getting into specifics of our performance, let me comment on the industrial market broadly. CBREEA reports US industrial market vacancy hit 6.1% at year end, a 30-basis point rise from Q3 '24. New construction start volume is 62% lower than the third quarter 2022 peak, with just 43 million square feet breaking ground in Q4 '24.
In our 15 target markets, space under construction totals 143 million square feet, signaling future quarterly completions could fall well below the 46 million square feet delivered in the fourth quarter of '24. On the demand side, net absorption nationally was 24 million square feet in the fourth quarter, 15 million of which was in our target markets.
With the election behind us, we're hopeful that this reduction in uncertainty will lead to a stronger commitment to growth investing, and in turn a more consistent pace in development leasing.
From our portfolio point of view, we ended the year with in-service occupancy of 96.2%, aided by some fourth quarter development leasing, which I will touch upon shortly. Our team also delivered a cash rate increase of 51% for the year., which is the second highest in our 30-year history. This marks back to back years of 50+% for this metric.
Looking at our 2025 lease expirations, we're making solid progress. And are now through 59% by square footage. Together with new leasing, our cash rental rate increase for leases signed with 2025 commencement date is 33%. Excluding the 1.3 million square foot fixed rate renewal in central Pennsylvania we discussed on our last call, 2025 signed leases to date had a cash run rate increase of 42%.
For the full year, we expect cash rental rate growth to range from 30% to 40% overall and 35% to 45%, excluding the aforementioned central PA renewal. We ended the fourth quarter on a positive note with about 1 million square feet of signed development leasing on balance sheet and another 463,000 square feet in our Phoenix joint venture.
On balance sheet, we signed a full building lease for our 542,000 square footer in Nashville with a repeat customer nine months ahead of the anticipated building completion. We also leased the remaining 350,000 square feet at our first logistics center at 283 Building B in Pennsylvania, and 100% of our 83,000 square foot First Elm building in the Inland Empire.
As I noted at the start of the call, our team delivered an excellent year of development leasing. In total for 2024, we signed 4.7 million square feet of development leases inclusive of our joint venture. This compares to a budgeted number of 2.8 million square feet in our original 2024 guidance.
Not only were we pleased with the amount of leasing, the signings were broad-based, representing 10 of our 15 target markets, which were Northern and Southern California, Nashville, Central Pennsylvania, Phoenix, Houston, Chicago, Seattle, Miami, and Denver. Many thanks to our regional teams for this fantastic performance.
We've also started two new developments which will contribute to our long-term growth. On the heels of the 542,000 square foot lease at our first Rockdale Park in Nashville, we started a 317,000 square foot building. Our total projected investment is $33 million. Nashville's long-term growth drivers and current fundamentals are strong, as vacancy stands around 3% and unleashed new supply represents 1.7% of total stock.
In the Lehigh Valley in the I-78/81 corridor, we started our first phase at First Park 33. There we're constructing two buildings totaling 362,000 square feet with a total estimated investment of $63 million. The building sizes and depths will allow us to target the smaller tenant segment which we believe is underserved by new construction, as most availabilities are targeting tenants 200,000 square feet and up.
The cash yield for each of the fourth quarter starts is expected to be north of 7%. We're also well positioned for future development opportunities as submarket conditions warrant.
In the fourth quarter, we were pleased to close on the final land parcel at our First Park Miami project for $16 million. With this addition, we can now develop an additional 1.1 million square feet of product at what will ultimately be a 2.5 million square foot park. In total, our land positions across our target markets can accommodate 15 million square feet of growth.
Moving now to dispositions. We sold 5 buildings totaling 214,000 square feet for $25 million in the fourth quarter to bring our total for the year to $163 million. Since 2010, we've completed the sale of $2.4 billion of legacy assets, achieving portfolio objectives for location, functionality, and growth prospects. Therefore, moving forward, you should assume property sales volumes will be lower than prior years. For 2025, we expect asset sales of up to $75 million.
Lastly, with respect to our dividend. Given our performance and outlook, our Board of Directors declared a dividend of $0.445 per share. This is an increase of 20.3%, which is aligned with our anticipated cash flow growth.
Before I turn it over to Scott, I'd like to express our heartfelt sympathies to the people of Southern California who have been impacted by the wildfires. The physical and emotional destruction is tragic and unprecedented, and FR will continue to do what we can to support the impacted communities. With respect to our people and properties, we are fortunate and thankful to be able to say our teammates and their families are safe and sound, and none of our buildings have been affected. With that I'll turn it over to Scott.

Scott Musil

Thanks, Peter. Let me recap our results. The refunds from operations were $0.71 per fully diluted share compared to $0.63 per share in 4Q 2023. For the year, NAREIT FFO per fully diluted share grew 8.6% to $2.65 compared to $2.44, 2023.
Our cash, same story, NOI growth for the quarter, excluding termination fees was 9.3%. The results in the quarter were primarily driven by increases in rental rates and new and renewal leasing, rental rate bumps embedded in our leases partially offset by higher free rent.
For the full year 2024, cash same store NOI growth was 8.1%, excluding the third quarter 2024 accelerated recognition of a tenant improvement reimbursement in central Pennsylvania and a similar accelerated reimbursement in the first quarter of 2023 related to a tenant in Dallas. We finished the quarter with in-service occupancy of 96.2% of 120 basis points from the third quarter, and 70 basis points from year-end 2023.
As we stand today, we have approximately 140 basis points, lease up opportunity from developments place and service '23 in 2024.
Summarizing our leasing activity during the fourth quarter. Approximately 1.9 million square feet of leases commenced. Of these, 600,000 were new, 800,000 were renewals, and 500,000 were for developments and acquisitions with [lease].
Now on to our 2025 initial FFO guidance. Our guidance range for NAREIT FFO is $2.87 to $2.97 per share. At the midpoint of $2.92 per share, this represents a 10% growth rate from 2024. Key assumptions are as follows. An average quarter end in service occupancy range, 95% to 96%. This assumes approximately 1.6 million square feet of development leasing during the year, the vast majority assumed to occur in the second half.
Cash seems to allow growth before termination fees of 6% to 7%. Note that the same store guidance excludes the impact of the accelerated recognition of a tenant improvement reimbursement in 2024 related to the aforementioned Central Pennsylvania lease.
Guidance includes the anticipated 2025 costs related to our completed and under construction developments at 31 December. For the full year 2025, we expect to capitalize about $0.09 per share of interest. And our G&A expense guidance range is $40.5 million to $41.5 million. Let me turn it back over to Peter.

Peter Baccile

2024 was an outstanding year and I would once again like to extend my thanks to the entire First Industrial team. Your dedication to serving our customers and driving strong future cash flow growth from development leasing and rental rate increases are driving meaningful growth in shareholder value. And I know you share my excitement for the growth opportunities that lie ahead in 2025 and beyond.
Opera, with that, we're ready to open it up for questions.

Question and Answer Session

Operator

(Operator Instructions)
Ke Bin Kim, Truist.

Ke Bin Kim

Thank you. Good morning. Can we first start off with maybe getting refresh, your refreshed views on the Los Angeles and Inland Empire markets and if you're seeing any green shoots for demand growth?

Peter Baccile

Jojo you want to take that?

Johannson Yap

Sure. Ke Bin, Hi. It's Jojo. When you look at post-election, we've guided more tours, more requests for proposals, so touring activities is up. In terms of ports year-to-date it's up 22%. We haven't seen a big impact on that although as we've stated here, we've leased First Elm, which is a low coverage site that might have impacted positively our leasing of that asset, but we're not going to predict in a big move because of the port activity.
Vacancy did pick up for both LA and IE a little bit, but there's a couple of things that we're watching closely and the trend is good. Overall, under construction for LA, IE is down in terms of quarter to quarter. Completions were also down quarter to quarter, starts to significantly down. So if that trend continues and the market continues to absorb what's been delivered in Q4 2024, we should be -- the market should be firm enough.

Ke Bin Kim

Okay, and on your development pipeline, roughly like how much square footage are you assuming that you're leasing up at I guess at the midpoint for your guidance please.

Scott Musil

Sure, it's -- Ki Bin, Scott. We're assuming 1.6 million square feet of development leads up the vast majority of it waited till the year, second half of the year.

Ke Bin Kim

Okay, thank you.

Operator

Nicholas Yulico, Scotiabank. Please go ahead.

Greg McGinniss

Hi, this is Greg McGinniss on for Nick. Just hoping you could talk about the Denver market, what you're seeing on leasing there. Is occupancy is ticked down with the assets being placed in the service there, and any updates on Aurora Commerce Center would be appreciated.

Peter Baccile

Yes, sure, Greg, it's Peter. So Denver as we know has been working through a little bit of elevated supply that continues to get leased. Market occupancy improved a little bit in the fourth quarter. Demand has been okay, decision making continues to be elongated with some of the tenants or prospective tenants rather, in the market.
We have seen, as Jojo just commented about Southern California in the last couple of months, an increased level of urgency and momentum from some tenants that are in the market. But we still clearly have work to do in Denver, but we feel a little bit more optimistic with what we're seeing today than we felt a good part of last year.

Greg McGinniss

Okay thanks. And then with regards to future development, which geographies do you plan on focusing on. Yeah, just stop there.

Peter Baccile

Sure, we're not going to talk about volumes, but the markets right now that we would think about new starts. I'll just go by state really Pennsylvania, Texas, and Florida are the places that we would focus on next.

Greg McGinniss

Okay, and sorry, just one final follow up here. In terms of funding with the decrease and dispositions, how are you thinking about funding the development?

Scott Musil

It's same formula as the past. We're expected to spend $220 million and $25 million in development, excess cash flow, sales, and borrowings on the line of credit are going to be the sources.

Operator

Craig Mailman, Citi.

Craig Mailman

Scott, on the 1.6 million square feet of development leasing embedded in guidance, can you go through maybe how much of that would be -- a portion of that 140 basis points of lease-up opportunity versus projects that are currently under construction?

Scott Musil

Let me do a quick calculation. I think it's going to be the vast majority of it. So Craig, the 1.6 million square feet is basically comprised of our developments placed in service, not least. So that's already in the occupancy number. And then developments completed not in service. So those are the two pieces that make up the 1.6 million. We're not assuming any lease-up in any development completions in '25.

Craig Mailman

Okay. So that's not only helping FFO, but also helping same-store as well because that's currently a drag on NOI?

Scott Musil

Developments placed in service, not least, that could help same-store NOI. It just depends what the free rent assumption is. Because that's not (multiple speakers)

Craig Mailman

Okay. That is helpful. And then just more broadly, I know development leasing as -- you guys had a big year this year. And you kind of alluded to maybe things getting a little bit better on the ground. But just in the context of maybe what some of your peers have been saying about demand kind of the trend bottoming and getting better and supporting maybe a second half '25 reacceleration of net absorption. Kind of where do you guys -- what are you guys seeing on the ground? And what's your kind of most current thinking on when an inflection point could happen?

Peter Baccile

I'll start with this, and then Peter and Jojo can jump in. The -- you're kind of looking at a classic U-shape, the way we look at this, not a V-shape. So predicting how strong this rebound that you referred to is going to be is not easy. What we have seen, even though development leasing times are a bit elongated, assets are getting leased. In 2024, 863 million square foot of leases were signed across the country. And that's the third highest year in history.
So while we see falling rents in some markets or low rent growth in some markets, leases are getting signed and little by little and slowly and methodically, that we always talk about tenant alternatives when we talk about markets with additional space. Those alternatives are beginning to shrink. And equally helpful to that, obviously, is the fact that the national pipeline is now shrinking dramatically and new starts are staying at pretty low levels. So hard to say, Craig, what that inflection is going to look like. We're pretty conservative on that front, but we see it coming, and we feel good about the prospects.

Peter Schultz

Craig, it's Peter. I'll just give you two specific examples. The deal we announced in Pennsylvania. We've been working on that almost all of last year. So finally seeing some higher level of engagement. The deal we reported in Nashville with our repeat customer and the early lease up there. They're in the manufacturing business of electrical components, and they have a lot more urgency to get that done. So things are a little better, as we've said, and we're seeing higher engagement and more momentum. What we really want to see, to Peter's point, is that momentum continue to be persistent during the year.

Peter Baccile

One last thing I'll add to that while we're on the subject of development leasing and time frames. Some of the assets that we have, as you know, are completed and in service and some are beyond the 12-month downtime. We also have leased assets like we did last year, the 1 million footer in Stockton at completion, the 540 in Nashville at roughly completion. I'm sorry, 9 months ahead of completion. And the 360 in the Philly market at completion.
So when you look at -- if you look at our vintages, we have to group them by vintages. That's kind of the year we've started the projects. So if you look at by vintage, going back to 2018, every vintage has leased on average, below 9 months. So it was less than 9 months of downtime.
So some projects are simply going to take longer. Maybe it's the market they're in. Maybe it's the depth of the demand for the particular size of the asset, and some are going to happen quickly. And those time frames are as difficult to judge today as they've been in the last couple of years.

Operator

Vince Tibone, Green Street Advisors.

Vince Tibone

Are there any large move-outs in '25 that we should be aware of? And generally, how do you think tenant retention rates could trend this year versus the '24 levels?

Peter Baccile

Chris, do you want to take that?

Christopher Schneider

Obviously, we've talked about the move out -- 700,000 square foot move up in Central PA, and we're not aware of any other significant move-outs. Tenant retention last year, we were one of our highest rates in the last 3 or 4 years. We're at 77%. So we expect that number to be very similar going forward.

Vince Tibone

No, that's helpful. Maybe just a quick related follow-up. How about bad debt, if you could share maybe where bad debt as a percentage of revenue came in for '24? How are you thinking about '25? Are you seeing any cracks in certain tenant categories? And any commentary on there would be great.

Scott Musil

Sure, Vince. It's Scott. Bad debt expense was $700,000 in 2024. That was 10 basis points of gross revenue, so a very, very low number. We're assuming $1 million assumption in '25 like we have in the past several years. As far as material tenants on the watch list, we talked about boohoo. They have paid January rent, were expected February's rent any day based upon payment history. And keep in mind with that tenant, we do have a security deposit in the form of a letter of credit that takes care of 12 months of rent.

Operator

Todd Thomas, KeyBanc Capital Markets.

Todd Thomas

I just wanted to go back to the 1.6 million square feet of development leasing in the guidance, which sounds like it's mostly related to projects that are already in the in-service portfolio. Can you just comment on the 4 projects that will transition to the in-service portfolio during the first half of '25? You have a little leasing at First Park Miami, but can you provide an update on interest for the remainder of that space and the 3 Inland Empire assets? And is there anything embedded in guidance for those properties as a transition?

Johannson Yap

Sure. It's Jojo. Right now scheduled for in-service data 2025, our 4 projects. 3 of the 4 is in Inland Empire and 1 is in Miami. They range from 3 buildings are at the 140,000 to 160,000 square foot range and 1 is a 325,000 square footer.

Todd Thomas

Can you just comment on the interest level for those assets and whether there's any expected leasing during the year as they transition?

Johannson Yap

Sure. Let me comment on the 3 buildings in Inland Empire, and I'll turn it over to Peter on the First Park -- building in First Park Miami. For the 3 buildings, again, like I said, the Class A, they're all in the 215 corridor, very, very state-of-the-art facility and are looking at 155,000 feet, 160,000 street -- square feet and 325,000 square feet. In all of those projects, we're having tours and we're also responding to RFPs. In terms of leasing, basically, we've assumed that they will be leasing in the second half of this year.

Peter Schultz

And then, Todd, it's Peter. For Miami, we have active RFPs out for all of the remaining space in that building.

Todd Thomas

Okay. And then just curious if you could just provide an update if there's any sort of forecast for 2025 for market rent growth across the portfolio -- across the portfolio's markets that you're targeting or eyeing?

Peter Baccile

So generally speaking, we're expecting modest rent growth. Some markets will be down, some will be up 1 point or 2. So maybe call it inflation plus a point is what we're expecting this year. SoCal probably flat to down a little bit.

Operator

Blaine Heck, Wells Fargo.

Blaine Heck

I know it's early on, but I was hoping you could talk about any change in tenant behavior you've noticed in the Southern California market or even Houston or Phoenix given the increased tariffs on China and delayed but the potential implementation on Mexico. I guess, are you seeing any hesitation to lease in those markets, or on the flip side, any pull forward of activity?

Peter Baccile

I'm going to start with this and Jojo can jump in too. It is, like you said, at the beginning of your question, very early. I think there's a lot of chaos around this topic, the topic of tariffs. Clearly, if very large tariffs were put in place for a very long -- for a long period of time, that's a negative. But at this point, who's to say what's really going to end up being the case and for what kind of term, it could be a negotiating ploy as you've seen is anyone's guess on what's going to happen with this.
We have not seen yet any reaction to this. No one has actually brought it up in terms of the tours that we're giving and properties or conversations that we're having. People haven't stepped away on this because of this subject. So again, it's too early and too unpredictable at this point. Jojo, you want to add anything to that? You good?

Johannson Yap

No, go ahead.

Peter Baccile

Okay.

Blaine Heck

Okay. Great. That's helpful. And then second question, can you talk a little bit more about the economics on incremental development? Just some color on how you've seen construction cost trending and expectations on the cost side this year. And given the slowdown in rent growth, what effect that might have on expected yields, if any?

Johannson Yap

Sure. This is Jojo. Well, if you look at 2024, on average, construction costs came down in the 10% range. It's primarily driven by the decrease in contractor margins and a stabilizing and slight decrease in construction materials. Going forward to '25, we're looking to flat to slightly down. I would say maybe 0% to 3% down. And yes, it has an impact on our total investment. Whatever it's -- if you're late, anywhere to 20% to 25% on your investment, of course, it's going to have a way by improving the yield slightly.

Peter Baccile

I'll just put some numbers around that. We talked earlier about having 15 million square feet of growth in our land holdings. Today, we can invest about $2 billion. That would pencil out to a high 6% yield. So -- and that's today, that includes today's market rents as well as our anticipated and expected cost framework for those projects, building in that reduction in some development costs. The 2 projects we just started a yield north of 7.

Operator

Rob Stevenson, Janney.

Robert Stevenson

I think you talked about it a little bit, but can you give a sort of broader overview of which of your core markets you're seeing the best operating fundamentals and tenant demand and which are the relatively weaker ones today besides Southern Cal?

Peter Baccile

Yes. I mean Nashville is the best market right now, vacancy is around 3%, very limited new starts. It's not so easy to get entitlements in that market. We're fortunate there to have a lot of growth opportunity. Pennsylvania is not bad. Lehigh Valley is decent. South Florida has cooled from its blue hot phase, but we're still very, very focused on South Florida.
Texas, so Houston and Dallas, doing very well. We're certainly looking for more land opportunities in the state of Texas and in those two markets. Of course, the right submarkets around Dallas. That's a very, very big market. Those would be the strongest markets. And aside from SoCal, I would say, while Denver is improving, it's still got some room to run. Phoenix has a lot of vacancy, but we're finding that with the product that we have on offer, we're attracting good tenant traffic and lease signings there.
So being there very early and being in a great location and offering the right sized product and benefited us greatly in that market. But that's how I would summarize the, call it, the pluses and minuses.

Robert Stevenson

Okay. That's helpful. And then in terms of tenants today, are you seeing any better demand at certain size levels? Or is -- what demand out there is fairly widespread across the various buckets, square footage wise?

Peter Schultz

Rob, it's Peter. I would say small or midsize are more active, generally speaking, than larger. And as we've talked about on prior calls, that varies by market. What's small in Florida or Denver is different than what small or midsize in Pennsylvania, as an example. Amazon had been pretty active in a couple of markets last year. There is demand for the larger sizes, but it's not as robust as it is in the smaller midsizes today.

Operator

Michael Carroll, RBC Capital Markets.

Michael Carroll

I wanted to follow up on Blaine's question. I mean, how difficult is it to underwrite a new development start today maybe versus a few years ago? I mean, do current market rents really support those developments broadly? Or does development only work in the Pennsylvania, Florida and Texas markets where you said that you're actually interested in pursuing them?

Peter Baccile

While the state of -- the existing opportunities in those markets that you just mentioned is positive. So that's why we're focused on those markets, and underwriting new deals there is fine. It's not a problem. Projecting out which other markets, like Southern California, for example, when those markets are going to be ready is a little bit more difficult.

Michael Carroll

So in the Pennsylvania, Florida and Texas market, you don't need rents to go up or you're not underwriting rents to go up to justify those developments? At the current market rents, you can get your 7-ish percent yield that you discussed with the deals that you just broke ground recently?

Peter Baccile

Correct.

Michael Carroll

Okay. And then just last one, I guess, Peter, can you talk about what's going on with broader tenant activity? I mean, has there been any noticeable change specifically after the elections? I mean, has tenants been much more active making decisions after the elections? Or has it just been kind of steady state for you and that wasn't really a driver?

Peter Baccile

This isn't really a light switch topic, meaning it didn't exist on Friday, and on Monday, it does. This isn't more of an evolutionary thing. What we have noticed is that there is a sense that being more entrepreneurial is going to be rewarded. That means investing in growth, taking some risk, whereas prior, it's been most definitely risk off. Investing tens of millions of dollars into a new lease and equipment and product, there's a lot more confidence around the fact that that product will move.
And so we're seeing right now, the result of that is more foot traffic. We're receiving a lot more RFPs. I would say, prior to that, we were sending out more unsolicited proposals, perhaps, than we were receiving RFPs. That equation has changed. Now I want to caution, we're cautiously optimistic. We have not seen -- as Peter mentioned earlier, what we want to see is consistent and persistent development lease signings. And that is the question mark, and that's what we're keeping our eye on.

Operator

Caitlin Burrows, Goldman Sachs.

Caitlin Burrows

You mentioned earlier that retention has been quite high and you expect it to continue, but I think a concern some people have is that some tenants have too much space, so reducing what they have. Just wondering what's your view are there tenants that have too much space that needs to be worked through? And how do you think automation could end up impacting space needs?

Peter Baccile

Yes, I'll take the first part of that. So yes, the sublease space nationally is about 1.1% of existing stock. That's approximately double the long-term average. Within our own portfolio, we have some sublet space, none of which is impacting us from a revenue standpoint. We have good leases with good tenants on almost all of that space. So we'll just have to work through that over time, and we're keeping an eye on that. What was the second part of your question?

Scott Musil

Automation.

Johannson Yap

We're not seeing -- I mean, when you look across the board in our portfolio, we don't see tenants massively investing in automation that drives the utilization of space. Of course, you have the big tenants that are heavily automated, like the large e-commerce company. So -- but that's part of the business plan for day 1. And -- but we're not seeing a sea change.

Caitlin Burrows

Got it. Okay. And then I think this topic came up some point in the past. But in terms of the development projects that have taken longer to lease up, do you think that's a case where reducing price would help? Or is it not really an issue of price, it's more just -- does somebody need that space or not?

Peter Baccile

Peter, do you want to take that?

Peter Schultz

Sure. Caitlin, I would say it's not really price. We're market sensitive. It's more about, as we've talked about on the last several calls, just the pace of decision-making and companies finally saying, okay, we need the space. You saw that in our development leasing results throughout last year, culminating in what we announced in the fourth quarter. So we just want to see more of that. It's a frustrating, for sure, that tenants aren't making a decision at the pace that we've all seen the last several years, but it's not about price. We're going to do what we need to do to lease the space, as we always have.

Operator

Nick Thillman, Baird.

Nicholas Thillman

Maybe I wanted to touch a little bit on just the LA. wildfire impact. I know it's early days and the rebuilding efforts are just starting. But where do you think what markets are most likely the benefit of kind of that rebuilding effort? Is it the IE or is it LA County proper? Just some thoughts there would be helpful.

Johannson Yap

Yes. This is Jojo. First of all, the timing is going to be very hard to predict, depending on how the permit process, how the cleanup process and redevelopment process, design process all shakes in. But setting timing aside, I mean a lot of investment will be dedicated to new infrastructure and house construction. And if you look at what components needed for infrastructure and house construction, that would need storage of building materials and actual infrastructure that goes basically under the ground.
So going forward, I think -- we think that it will necessitate outside surge of materials closer in to where the tragic fires happened. So our thought is that LA County benefit the most.

Nicholas Thillman

That's helpful. And then just maybe touching a little bit on development, maybe on build-to-suit opportunities, have you seen any sort of increase in that activity across your markets?

Peter Schultz

Not really, particularly given that tenants have choices today on the existing inventory unless it's something really specific and unique. Certainly, there are some we were glad to pre-lease the building in national 9 months ahead of completion. So in essence, that somebody who wanted some influence over the design and specifications for them. But tenants still have choices today in the market. So build-to-suit is probably less active.

Operator

Mike Mueller, JPMorgan.

Michael Mueller

I know you've addressed about 60% of the '25 expirations. Looking at the remaining 40%, is there anything that stands out in terms of geography or size? Or is it kind of more of the same as to what you've leased already?

Christopher Schneider

Yes, it's pretty much broad-based across our makeup of our -- the [Jaggery], so nothing stands on.

Michael Mueller

Okay. And then, Scott, I think you mentioned about $225 million of development spend for the year. It looks like maybe half of that applies to projects that are already underway. So is there a way you can kind of ballpark what you think development starts could be for the year?

Scott Musil

I'm looking at Peter now.

Peter Baccile

We're not going to give volume on development starts that we have certain opportunities that we think we're going to move ahead with. But as the global economy turns and as markets change, that could change. So that's why we don't talk about volume. Talking about location is fine. And as I mentioned, Pennsylvania, Texas and Florida are the places we would go.

Operator

Vikram Malhotra, Mizuho.

Vikram Malhotra

Congrats very strong execution in '24. Just maybe first one, if you can clarify the development lease-up that you've done in '24? You may have addressed it. I just wanted to get a better understanding of when this hits FFO and AFFO or cash flow in 2025 and '26. Is it mostly baked for '25? Or is this some of what you've leased in '24 actually hit next year?

Scott Musil

So if you look at the fourth quarter leasing, the 2 deals that are expected to start in '25 or the joint venture deal, I think that's first quarter, Jojo. And then [Peter Steel] in Nashville is a 3Q expected start date. Everything else started in 2024.

Vikram Malhotra

Got it. And then just in the model, as you've kind of looked at occupancy, further lease-up of the developments of 1.6 million, you also mentioned 60% of the expirations are covered. I'm just wondering like do you have higher than normal visibility or average visibility this year than sort of prior years given all the development lease up in the 60% you mentioned or it's kind of average?

Peter Baccile

It's more average. We're at a similar point with our rollovers as we always are at this time of the year. And with respect to development leasing, I wouldn't say we have any more visibility than we had last year.

Vikram Malhotra

Got it. And then just lastly, the occupancy map. Some of your peers have outlined sort of a dip in the first half, down to perhaps 94%, 94-plus percent and then an expectation of a pick back up. Can you just sort of walk through like how much of the guide is dependent sort of on a back half recovery?

Christopher Schneider

Yes. If you look at our occupancy that we're projecting for 2025, we're going to be down in the first and second quarter. We've talked about the 700,000 square foot move-out in Central PA and the 4 developments are coming in service in the first quarter and the second quarter. So we'll definitely have a pickup with occupancy in the last 2 quarters of the year.

Operator

[Teo Oksana], Deutsche Bank.

Yes. Again, congrats on a really strong outlook and really strong execution in '24. I wanted to go back to Jojo's comments about Southern California. I think you mentioned that rent growth in '25 is expected to be sort of flat to maybe slightly down.
And I guess I'm trying to understand that number in the context of kind of brokers and even some of your peers talking about rental rates down anywhere from 10% to 20% on a year-over-year basis in '24 and even rental rates to be still above pre-pandemic levels. So just trying to understand that flat to down comment relative to kind of some of all the other stuff going on in Southern California.

Peter Baccile

Yes. I mean, I'll start out and Jojo can take -- provide more detail, but portfolio composition matters. We all operate in several markets. And when I say we all, I mean our peers, whether public or private. Delivering the product that meets the demand has always been one of our primary focuses.
And delivering product that's going to remain competitive in its submarket for the long term has been a key focus. So we can't create rent growth and tenants out of nowhere. But we can deliver a product that is so competitive that's amongst the first to lease. And that's why we have maybe perhaps a slightly different view on rent growth for our markets as others do.

Operator

Brendan Lynch, Barclays.

Brendan Lynch

Maybe to follow up on that, looking more broadly at other markets around the country. Can you talk about your market pricing assumptions that are embedded in guidance?

Peter Baccile

We build up our budgets from the ground up lease by lease. So it's a little bit different maybe than the question you're asking. We don't take inputs necessarily of all the economic metrics to decide that. We really go based on what the market leaders who are talking to the tenants in the market and the brokers in the market think about demand, and we match that up with the product that we have on offer. It's a little tougher to comment your question with the stats, I think, that you're looking for.

Brendan Lynch

Okay. That's still helpful color to understand the process. Maybe you could also talk about different levels of demand that you're seeing between different types of tenants, and in particular, 3PLs?

Peter Baccile

Sure. Peter, you want to.

Peter Schultz

Sure, it's Peter. I would say the activity continues to be broad-based as we've talked about for a number of quarters. 3PLs remain active. Certainly, they over leased some space over the last couple of years, but they're still very active on the prospect is we're seeing manufacturing, autos, e-comm, food and beverage.
As we responded to Rob Stevenson's comment earlier, activity better in the smaller and midsized ranges, generally speaking, around the country, which varies by market. But it continues to be pretty broad-based. And our smaller midsize spaces, for the most part, in our existing portfolio are highly leased and re-leased fairly quickly should we have an availability.

Operator

Ki Bin Kim, Truist.

Ke Bin Kim

Going back to your comments about dissolutions being up to $75 million. I was curious, how much of that is a function of perhaps pricing not being quite there versus after selling $2.4 billion, are we much closer to, I guess, your longer-term ideal portfolio and perhaps going forward, should we expect this reduced disposition level to continue?

Peter Baccile

Yes. It's basically the latter, Ki Bin. We're happy with what we have. We have some trimming we'll do. You're always going -- every year, you're going to -- I guess, I'll call it pull a GE, right? They were at the bottom 10% every year. We're going to always have something we'll sell. But in terms of any meaningful volume goals and targets, we don't have those anymore.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Peter Baccile for any closing remarks.

Peter Baccile

Thank you, operator, and thanks to everyone for participating on our call today. You all have very good questions, and we appreciate that. If you have any follow-up from our call, please reach out to Art, Scott or me. And have a great weekend.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.