EastGroup Properties (NYSE:EGP) raised its full-year funds-from-operations guidance after reporting third-quarter results that exceeded its prior outlook, supported by stronger same-property net operating income, occupancy and leasing activity.
CEO Marshall Loeb said third-quarter FFO was $2.45 per share, $0.04 above the midpoint of the company’s guidance and 7.9% higher than the third quarter of 2025. Year-to-date FFO per share increased 7.7%, he said.
“Our quarterly results demonstrate the portfolio’s quality and the resiliency within the industrial market,” Loeb said, citing continued tenant demand across the company’s markets and property types.
Occupancy, Leasing Spreads and Same-Store Growth
Quarter-end leasing stood at 97.3%, while physical occupancy was 96.5%. Same-store occupancy ended the quarter at 97%. The company completed 2.9 million square feet of second-generation leasing during the quarter, a company record, according to President Reid Dunbar.
Leases signed in the third quarter produced re-leasing spreads of 36% on a GAAP basis and 21% on a cash basis. Through the first nine months of the year, re-leasing spreads were also 36% GAAP and 20% cash.
Cash same-property net operating income rose 7.1% from a year earlier, above the company’s expectations. CFO Staci Tyler said the result beat EastGroup’s internal projection by 170 basis points, while average same-property occupancy of 96.9% exceeded projections by 50 basis points.
Tyler attributed the occupancy outperformance primarily to leasing volume, including new and renewal leases signed during the quarter. Some tenants also remained in place briefly after their lease expiration dates, contributing roughly 10 to 15 basis points of the occupancy outperformance, she said.
Tenant retention has remained elevated, reaching nearly 79% year-to-date, according to Loeb. He said EastGroup generally prioritizes keeping occupancy high while seeking market rents across its portfolio.
Management said rental growth has been strongest in markets including the Carolinas, Georgia, Texas and Arizona. California has improved from prior periods but remains uneven, with certain markets still experiencing flat to negative absorption. Loeb said California represents about 14% of EastGroup’s net operating income.
Guidance Raised as Development Activity Expands
EastGroup increased its 2026 FFO guidance midpoint by $0.06 to $9.65 per share, representing projected growth of 7.5% from 2025 actual results. Fourth-quarter FFO is projected at $2.47 to $2.53 per share, with a midpoint of $2.50, $0.02 above the company’s prior projection.
The company raised the midpoint of its full-year cash same-property NOI growth outlook by 70 basis points to 7.5%. It now expects same-property occupancy of 97% for the year, 30 basis points higher than its previous forecast, and average month-end occupancy for the operating portfolio of 95.9%, up 20 basis points.
EastGroup also increased planned development starts by $65 million to $390 million for 2026. The company had started $285 million of projects through the first nine months and expects to begin another $105 million during the fourth quarter.
Dunbar said development leasing totaled 500,000 square feet in the third quarter and approximately 2 million square feet year-to-date, exceeding the company’s full-year development leasing totals in each of the prior three years. Management described the increase in starts as largely demand-driven, including one pre-leased building and continued leasing progress at existing developments.
Loeb said rising construction costs, including costs for steel, diesel and labor, are affecting the development environment. He added that those higher costs should support future rental growth, while making it more difficult for merchant developers to underwrite speculative projects and eventual asset sales.
Acquisitions and Capital Position
The company acquired five projects during the third quarter and through October, representing total investment of $320 million. EastGroup raised its full-year acquisitions guidance by $145 million to $360 million.
Management said the acquisitions deepen EastGroup’s presence in existing markets and generally fit within the top tier of its portfolio. Reid said assets acquired year-to-date are expected to generate stabilized straight-line yields in the mid-6% range, with some properties offering upside from leasing vacant space.
Loeb said the company has observed cap rates increase by approximately 20 to 30 basis points in some transactions, although conditions vary by market. He said the company has benefited from situations where other potential buyers did not complete transactions, allowing EastGroup to purchase assets while maintaining underwriting discipline.
To fund investment activity, EastGroup entered into $485 million of forward equity share agreements during the third quarter. Including agreements from earlier in the year, the company had $695 million of forward equity agreements outstanding at a weighted average price of approximately $202 per share.
At quarter-end, EastGroup had $195 million outstanding under its $675 million unsecured bank credit facilities. Tyler said the company plans to settle forward equity agreements and repay borrowings as it funds recent acquisitions, land purchases, expanded development activity and $140 million of fourth-quarter unsecured debt maturities.
Debt to total market capitalization was 14.6% at quarter-end, while annualized debt-to-EBITDA was 3.2 times and interest and fixed-charge coverage was 14.7 times.
Data Centers Remain a Demand Tailwind
Management said data center-related tenants accounted for about 135,000 square feet of leasing in the quarter and about 15% of new leasing activity year-to-date. Those tenants are generally suppliers and service providers rather than data center operators themselves.
Loeb said EastGroup is not constructing specialized buildings specifically for data center demand. Instead, the company’s traditional shallow-bay industrial properties have attracted businesses such as HVAC contractors and electrical firms serving the sector.
Dunbar said data center demand is one of several demand drivers, alongside e-commerce, advanced manufacturing and the company’s core customer base serving local economies. He added that Amazon’s reported Project Mercury initiative, which has been described as requiring facilities in the 100,000- to 200,000-square-foot range in infill locations, could align with EastGroup’s portfolio strategy.
Loeb said management’s principal concerns heading toward 2027 include broader consumer and economic conditions, as well as retaining the company’s operating team. He said EastGroup remains focused on FFO-per-share growth, portfolio quality and maintaining a strong balance sheet through changing market conditions.
About EastGroup Properties (NYSE:EGP)
EastGroup Properties, Inc (NYSE: EGP) is a self-administered and self-managed real estate investment trust that owns, develops, acquires and operates industrial properties. The company primarily focuses on functional, flexible warehouse and distribution facilities designed to serve local and regional businesses, including light manufacturing, service and last-mile distribution users.
Founded in 1969 and headquartered in Jackson, Mississippi, EastGroup concentrates its portfolio in major Sun Belt markets.
