Rexford Industrial (REXR) Q2 Earnings: Delivering on Growth Amid a Tight Market

Rexford Industrial Realty (REXR) reported its Q2 2025 earnings on July 16, 2025, showcasing resilience in a challenging industrial real estate landscape. The company beat consensus estimates on both revenue and earnings, while maintaining robust occupancy rates and disciplined capital recycling. This article dissects key metrics against analyst expectations to evaluate whether REXR remains undervalued and its growth trajectory sustainable.

Revenue and EPS: Outperforming on Leverage and Leasing Momentum

Analysts had projected revenue of $248.8 million for Q2 2025, but Rexford reported $249.5 million, narrowly surpassing expectations. The slight beat was driven by strong rental income growth in its Southern California infill portfolio, where occupancy remains near record highs. Net income surged to $0.48 per diluted share, comfortably outpacing the consensus estimate of $0.58—a result amplified by gains from property dispositions.

While Core FFO per share dipped 1.7% year-over-year to $0.59, this reflects share dilution from equity issuances rather than operational weakness. Total Core FFO rose 7.8% to $139.7 million, underscoring scalable asset management. The company's focus on high-barrier-to-entry markets has insulated it from broader industrial sector softness, as seen in its 20.9% net effective rent growth on new leases.

Occupancy and NOI: High Demand, Steady Returns

Occupancy metrics reaffirmed REXR's market dominance. The Same Property Portfolio occupancy rate ended Q2 at 96.1%, up 0.4% from the prior quarter and well above the 95.7% level in Q1 2025. This stability contrasts with broader industry declines, as retailers and e-commerce players prioritize infill locations for speed-to-market advantages.

Net Operating Income (NOI) growth, however, highlighted mixed dynamics. Total Portfolio NOI rose 2.9% year-over-year to $186.3 million, but Same Property NOI grew only 1.1% on a net effective basis. Cash NOI, which strips out non-cash adjustments, increased 3.9%, signaling cash flow resilience. The gap between net effective and cash NOI suggests some lease concessions to retain tenants—common in a cooling market—but Rexford's ability to maintain occupancy without drastic rate cuts bodes well for future NOI stability.

Leasing Activity: Pricing Power and Strategic Repositioning

Leasing metrics were a standout. Rexford executed 1.7 million square feet of new and renewal leases in Q2, with net effective rental rates rising 20.9% compared to expiring terms. While this figure was skewed by a single lease with negative spreads (-17.6% net effective, -22.9% cash), excluding that outlier, new leases still showed 4.2% cash rate growth—a sign of enduring pricing discipline.

The company's repositioning strategy—converting older warehouses into modern, e-commerce-ready facilities—remains a growth driver. 8.5 million square feet of improved land and industrial outdoor storage (IOS) sites were 97.9% leased, with redevelopment projects yielding a 7.4% unlevered IRR year-to-date. This asset-light recycling model, where REXR sells mature assets and reinvests in high-margin upgrades, positions it to capitalize on long-term demand.

Balance Sheet: Fortress Finances Amid Rising Rates

Rexford's financial flexibility stands out. Its Net Debt to Enterprise Value ratio of 25% and Net Debt to Adjusted EBITDAre of 4.0x reflect minimal leverage, while Moody's reaffirmed its Baa2 investment-grade rating. The company also extended its credit facilities, locking in 3.41% fixed interest rates via swaps to mitigate SOFR volatility.

With $1.8 billion in liquidity, REXR can pursue accretive acquisitions or dividends without overextending. The board raised the Q3 dividend to $0.43 per share, maintaining a payout ratio of 138% of Core FFO—a level sustainable as long as occupancy holds.

Guidance: Pacing for Stability

Management updated net income guidance to $1.38–$1.42 per share, reflecting confidence in disposition gains and NOI stability. Core FFO guidance remained unchanged at $2.37–$2.41, with same-property NOI forecasts of 0.75–1.25% (net effective) and 2.25–2.75% (cash). The conservative outlook acknowledges macro risks but assumes 95.5–96% average occupancy for 2025—a target supported by current leasing trends.

Investment Thesis: Undervalued but Not Without Risks

At current prices, REXR trades at a 14.5x 2025 Core FFO multiple, below its five-year average of 16x, suggesting undervaluation. Its focus on high-demand infill markets, fortress balance sheet, and disciplined capital recycling justify a Hold rating with upside potential if occupancy stays resilient.

However, risks persist. Rising interest rates could pressure occupancy if tenant costs outpace revenue growth, while prolonged economic weakness might test lease renewal rates. Investors should monitor REXR's lease renewal spreads and disposition pipeline closely.

Final Take: A Reliable REIT for Defensive Portfolios

Rexford's Q2 results affirm its status as a defensive industrial REIT, delivering on both growth and stability. While the Core FFO per-share dip is a minor concern, it's outweighed by its fortress balance sheet and sector-leading occupancy. For income-focused investors seeking exposure to the infill industrial boom, REXR remains a compelling play—provided they acknowledge the sector's macro headwinds.

Investment Recommendation: Hold with a positive bias. Consider adding to positions on dips below $22/share, targeting the $25–$28 range for 12-month appreciation. Pair with broader industrial exposure via ETFs like PSA or RCL, but prioritize REXR for its operational discipline.