According to CEO Bill Hankowsky on the Liberty Property Trust’s Q1 2019 call, the REIT continues to benefit from an outstanding demand for industrial space. US industrial absorption was 32 million square feet in the first quarter and the national availability rate remained unchanged at 7%.
“So, in general, supply and demand remain in balance. As others have noted, national supply is increasing with a bulk of the supplies skewed towards very large buildings in certain sub-markets. The key to effective execution in this environment is diligence and on the ground knowledge of the markets.”
Liberty’s teams, he continued, executed very well in the first quarter and we’ve made significant and excellent progress in advancing the company’s business and strategic goals for the year. “Leasing activity was outstanding.”
He pointed out that the company leased close to a record 8.9 million square feet in the quarter. “This level of activity represents 44% of the leasing we had anticipated doing for the entire year. These leases yielded extremely strong rent growth at 6.6% on a cash basis and 16.3% GAAP. Our retention rate for the quarter was a very high 75%. Average lease terms were longer than historical for both replacement and retention leases.”
Occupancy declined modestly as expected, he explained, according to the company’s business plan for the year to 95.6%. “Occupancy will increase during the second half of 2019 consistent with our plans for the year. We are making significant progress in our strategic objective for the year of disposing of our remaining office assets and are deploying the capital from those sales diligently and significantly, executing over $300 million of value creation capital activity this quarter with our dispositions, acquisitions and development deliveries.”