STAG Industrial Sees Brighter Industrial Landscape in Q4 2024: Leasing Reaccelerates with Strong Tenant Demand

STAG Industrial, Inc. reported a solid quarter of operating results in its fourth quarter 2024 earnings call, with the company citing an improved industrial supply backdrop and strong tenant demand.

"The supply pipeline continues to contract with deliveries down over 30%, and this is expected to continue in 2025," said Bill Crooker, Chief Executive Officer. "Much of the weakness was specific to certain markets, but many of the markets we operate in remain healthy on both the supply and demand segment."

Despite muted leasing demand in aggregate in 2024, STAG Industrial saw an increase in tenant demand since the election spanning a broad array of industries. The most active tenant industries have been commercial services, building products, and air freight and logistics.

In its portfolio, STAG Industrial witnessed the strongest market rent growth in non-coastal and manufacturing markets. Nearshoring and onshoring projects continue to progress, with pent-up demand from delayed decision-making by tenants expected to result in growing warehouse demand. The company has already leased 70% of its operating portfolio square feet it currently expects to lease in 2025, achieving cash leasing spreads of 23.8%, a level similar to last year and consistent over the last few years.

Additionally, STAG Industrial reported that American Tire Distributors, still working through their bankruptcy process, has all leases current with no missed rental payments as of today. The company's credit exposure from ATD is reflected in its initial 2025 guidance provided in yesterday's earnings release.

In terms of acquisitions, the company reported a volume for the fourth quarter totaling $294 million, consisting of 15 buildings with cash and straight-line cap rates of 6.2% and 6.9%, respectively. One notable acquisition was the purchase of a portfolio of 5 single-tenant buildings in Chicago, totaling 726,000 square feet, acquired for $73 million at a cash cap rate of 6.5%. The recent volatility with interest rates caused an initial slowdown in the transaction market to start the year, but STAG Industrial anticipates the acquisition market will gain momentum as the year progresses.

For dispositions this quarter, the company sold 2 buildings for aggregate proceeds of $29 million.