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Terreno Realty (TRNO) Sees High Occupancy, Rent Growth in Q1

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Terreno Realty Corporation (TRNO - Free Report) witnessed a rise in quarter-end occupancy and an increase in cash rents on new and renewed leases in the first quarter. This reflects solid demand for the company’s properties.

However, reflecting broader market concerns, Terreno Realty’s shares were down 0.59% during Friday’s trading session.

In its recently issued operating update, TRNO noted that for its operating portfolio, occupancy reached 96.9% as of Mar 31, 2022, marking an expansion of 140 basis points (bps) from the prior-quarter end and 80 bps from the year-ago quarter end. Moreover, its same-store portfolio was 98.4% leased on Mar 31, 2022, up from 98.2% on Dec 31, 2021 and 97.4% on Mar 31, 2021.

Terreno Realty was able to lock in higher rents on new and renewed leases, reflecting resilience in its portfolio. Cash rents on new and renewed leases (commenced during the first quarter) — aggregating 0.7 million square feet and 4.2 acres of improved land — grew 34.8%, with a tenant retention ratio of 47.7%.

Terreno Realty continued to expand its portfolio through acquisitions during the January-March quarter. During the said period, TRNO shelled out a total of $86.1 million as the purchase price for the acquisition of four properties, comprising four buildings containing roughly 434,000 square feet and one improved land parcel of 1.2 acres. It has around $193.2 million of acquisitions under contract and approximately $100.4 million of acquisitions under letters of intent. Terreno Realty also completed the redevelopment of Americas Gateway 5 and the estimated stabilized cap rate is 6.6%.

As of Mar 31, 2022, Terreno Realty’s portfolio included 256 buildings, spanning 15.1 million square feet, and 37 improved land parcels encompassing 128.3 acres. It also had four properties under redevelopment.

Conclusion

Terreno Realty’s efforts to expand and strengthen its portfolio with acquisitions are a strategic fit. This also indicates that the company is financially sound to execute such deals.

There has been a significant increase in e-commerce’s share of total retail sales, spurring demand for warehouse and distribution spaces. Apart from the fast adoption of e-commerce, industrial real estate space is anticipated to gain traction over the long run from a likely rise in the inventory levels of companies as a precaution for any supply-chain disruption.

This, in turn, will keep supporting industrial landlords like Terreno Realty, Prologis (PLD - Free Report) , Duke Realty Corp. (DRE - Free Report) and Rexford Industrial Realty, Inc. (REXR - Free Report) to enjoy a favorable market environment.

However, with the industrial asset category being attractive presently, there is a development boom in several markets. This high supply is likely to fuel competition and curb pricing power.

Terreno Realty currently carries a Zacks Rank #3 (Hold). In the past six months, the company’s shares have rallied 14.9%, outperforming its industry's growth of 8.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Prologis carries a Zacks Rank of 2 (Buy) at present. Prologis’ 2022 funds from operations (FFO) per share is expected to increase 21.9% year over year.

The Zacks Consensus Estimate for PLD’s 2022 FFO per share has been revised marginally upward in a month.

Duke Realty carries a Zacks Rank of 3 at present. The long-term growth rate for Duke Realty is projected at 6.7%.

The Zacks Consensus Estimate for DRE’s 2022 FFO per share of $1.90 calls for a 9.8% increase year over year.

The Zacks Consensus Estimate for Rexford Industrial’s ongoing-year FFO per share has moved marginally north to $1.90 over the past month.

The Zacks Consensus Estimate for Rexford Industrial’s 2022 FFO per share suggests an increase of 15.9% year over year. Currently, REXR carries a Zacks Rank of 3.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.