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Terreno (TRNO) Announces Renewal & Expansion Lease at Fremont
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Terreno Realty Corporation (TRNO - Free Report) recently announced the execution of an early renewal and expansion lease in Fremont, CA, with an Advanced Air Mobility provider. This reflects the healthy demand for its properties.
The 30,000-square-foot lease, which was originally set to expire in February 2025, has been extended until August 2029. Additionally, the 41,000-square-foot expansion lease will begin in June 2024 and expire in August 2029.
The company has also executed a lease for 5.5 acres of improved land in Newark, NJ. This lease with an automobile exporter commenced on May 16, 2024, and is slated for expiry in January 2028.
The demand for industrial real estate space has been high amid an e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies.
As of Mar 31, 2024, TRNO’s operating portfolio was 96.2% leased to 572 tenants. For the company’s improved land portfolio of 45 parcels spanning 152.4 acres, the leased rate was 94.6% as of Mar 31, 2024 compared to 94.6% and 98.9% recorded as of Dec 31, 2023, and Mar 31, 2023, respectively.
TRNO was able to lock in higher rents on new and renewed leases during the quarter. The cash rents on new and renewed leases climbed 47.2%. The tenant retention ratio was 54.7% for the operating portfolio and 82.5% for the improved land portfolio.
U.S. Industrial Real Estate Market in Q1
Per a Cushman & Wakefield report, following two years of remarkable growth emerging from the pandemic, the U.S. industrial real estate market continues to cool off. Though tenant demand tapered off in the first quarter, it remains positive. The overall vacancy rate is trending higher as new completions continue to surpass net absorption.
However, though demand is moderating, it is not significantly plunging. There is new supply in the market, and vacancy rates are rising but at a manageable pace. Similarly, growth in rents is decelerating but remains solidly positive, suggesting a “soft landing.”
There was healthy new leasing activity throughout the first quarter. With 128.7 million square feet (msf) of transactions completed, quarterly new leasing activity was 3% higher than the 10-year pre-pandemic average from 2010 to 2019.
The overall vacancy rate is trending higher as new completions continue to surpass net absorption. The overall vacancy rate climbed an additional 60 basis points to reach 5.8%, propelled upward for the fifth consecutive quarter by the influx of new speculative supply. Despite being elevated, vacancy remains below its historical average of 7%. There is a moderation in rent growth, and industrial rents grew 6% annually in the first quarter of 2024 compared with 10% in 2023 and 20% in 2022.
Conclusion
With a solid operating platform, a healthy balance sheet position and strategic expansion moves, TRNO seems well-positioned to capitalize on long-term growth opportunities amid favorable industry fundamentals.
However, the elevated supply of industrial real estate and a high interest rate environment pose key concerns for the company.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have declined 8.1% compared with the industry’s fall of 2.1%.
Image: Bigstock
Terreno (TRNO) Announces Renewal & Expansion Lease at Fremont
Terreno Realty Corporation (TRNO - Free Report) recently announced the execution of an early renewal and expansion lease in Fremont, CA, with an Advanced Air Mobility provider. This reflects the healthy demand for its properties.
The 30,000-square-foot lease, which was originally set to expire in February 2025, has been extended until August 2029. Additionally, the 41,000-square-foot expansion lease will begin in June 2024 and expire in August 2029.
The company has also executed a lease for 5.5 acres of improved land in Newark, NJ. This lease with an automobile exporter commenced on May 16, 2024, and is slated for expiry in January 2028.
The demand for industrial real estate space has been high amid an e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies.
As of Mar 31, 2024, TRNO’s operating portfolio was 96.2% leased to 572 tenants. For the company’s improved land portfolio of 45 parcels spanning 152.4 acres, the leased rate was 94.6% as of Mar 31, 2024 compared to 94.6% and 98.9% recorded as of Dec 31, 2023, and Mar 31, 2023, respectively.
TRNO was able to lock in higher rents on new and renewed leases during the quarter. The cash rents on new and renewed leases climbed 47.2%. The tenant retention ratio was 54.7% for the operating portfolio and 82.5% for the improved land portfolio.
U.S. Industrial Real Estate Market in Q1
Per a Cushman & Wakefield report, following two years of remarkable growth emerging from the pandemic, the U.S. industrial real estate market continues to cool off. Though tenant demand tapered off in the first quarter, it remains positive. The overall vacancy rate is trending higher as new completions continue to surpass net absorption.
However, though demand is moderating, it is not significantly plunging. There is new supply in the market, and vacancy rates are rising but at a manageable pace. Similarly, growth in rents is decelerating but remains solidly positive, suggesting a “soft landing.”
There was healthy new leasing activity throughout the first quarter. With 128.7 million square feet (msf) of transactions completed, quarterly new leasing activity was 3% higher than the 10-year pre-pandemic average from 2010 to 2019.
The overall vacancy rate is trending higher as new completions continue to surpass net absorption. The overall vacancy rate climbed an additional 60 basis points to reach 5.8%, propelled upward for the fifth consecutive quarter by the influx of new speculative supply. Despite being elevated, vacancy remains below its historical average of 7%. There is a moderation in rent growth, and industrial rents grew 6% annually in the first quarter of 2024 compared with 10% in 2023 and 20% in 2022.
Conclusion
With a solid operating platform, a healthy balance sheet position and strategic expansion moves, TRNO seems well-positioned to capitalize on long-term growth opportunities amid favorable industry fundamentals.
However, the elevated supply of industrial real estate and a high interest rate environment pose key concerns for the company.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have declined 8.1% compared with the industry’s fall of 2.1%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are American Tower (AMT - Free Report) and Rexford Industrial Realty (REXR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for AMT’s 2024 FFO per share stands at $10.35, which indicates an increase of 4.86% from the year-ago period’s actual.
The Zacks Consensus Estimate for REXR’s 2024 FFO per share is pegged at $2.34, which suggests 6.85% year-over-year growth.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.