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STAG Industrial Sees Healthy Demand, Signs Lease Renewal

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STAG Industrial, Inc. (STAG - Free Report) recently clinched a lease renewal with an American automaker for a 1.1-million-square-foot warehouse distribution facility in Memphis, TN. This 64-month early lease renewal reflects the healthy demand for industrial properties and strength of the company’s operational capabilities.

Acquired last September, this Memphis asset had five years of remaining lease term. However, the early lease extension leads to a current remaining lease term of more than nine years. Moreover, it includes 2% annual rent escalators, thereby indicating a steady cash flow from the property over the upcoming years.

Apart from this renewal, early in August, STAG Industrial announced signing a five-and-a-half year lease for 1 million square feet at a warehouse distribution facility in Hampstead, MD, with a global leader in book publishing. Such deals reflect the decent demand for the company’s high-quality portfolio.

Notably, the industrial asset category showed resilience during the June-end quarter amid the coronavirus crisis on low vacancy rates, high-asking rents, positive net absorptions and robust rent collections. There has been a notable increase in e-commerce’s share of total retail sales, spurring demand for warehouses and distribution spaces.

Per a CBRE Group (CBRE - Free Report) report, the average asking rents finished the mid-year at $7.96 per square feet, marking a 6.3% increase year on year. In addition, the asset category has a near-record low overall vacancy rate of 4.7%. This is boosting growth prospects for industrial REITs like STAG Industrial, Duke Realty and Prologis, Inc. (PLD - Free Report) among others.

STAG Industrial has been capitalizing on the favorable fundamentals and the company commenced operating portfolio leases of 2.7 million square feet for the second quarter, resulting in a cash rent change and straight-line rent change of 1.6% and 9.6%, respectively. Moreover, the company witnessed 100% retention for 2.3 million square feet of leases expiring in the quarter.

Further, its rent collection has been healthy as of Jul 28, with the company collecting 98% of the second-quarter base rental billings for the quarter and 90.9% of its July base rental billings.

Currently, STAG Industrial carries a Zacks Rank #2 (Buy). Shares of this REIT have appreciated 12% over the past year, while its industry has declined 7.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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