STAG Industrial, Inc. (STAG) Q3 2026 Earnings Call Transcript

Greetings. Welcome to the Stagg Industrial Incorporated Third Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Steve Zaros, Vice President, Investor Relations. Thank you, Steve. You may begin. Thank you.

Welcome to Stag Industrials' conference call covering the third quarter 2026 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at www.stagindustrial.com under the Investor Relations section. On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecasts of core flow, same store in Hawaii, G&A, acquisition and disposition volumes, retention rates, and other guidance, Leasing prospects, rent collections, industry and economic trends, and other matters. We encourage all listeners to review the more detailed discussion related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GAAP measures contained in the supplemental information package available on the company's website. As a reminder, forward-looking statements represent management's estimates as of today. Stag Industrial assumes no obligation to update any forward-looking statements. On today's call, you will hear from Bill Crooker, our Chief Executive Officer, and Mats Pinard, our Chief Financial Officer. Also here with us today are Mike Chase, our Chief Investment Officer, and Steve Kimball, our Chief Operating Officer, who are available to answer questions specific to their areas of focus. I will now turn the call over to Bill.

Thank you, Steve. Good morning, everybody, and welcome to the third quarter earnings call for Stag Industrial. We're pleased to have you join us and look forward to discussing the third quarter 2026 results. The third quarter marked a continued improvement in industrial fundamentals, with national vacancy rates down since last quarter. Net absorption totaled approximately 75 million square feet nationally, the highest quarterly figure since early 2023, and has now topped 69 million square feet in each of the last two quarters. Through nine months, the market has absorbed more than 186 million square feet, a pace we have not seen since 2022, and non-coastal markets drove 80% of year-to-date absorption. New construction remains disciplined. While development starts are up, product under construction totals less than 2% of existing inventory, with much of it already committed through pre-leasing or bill-to-suit agreements. We are seeing broad-based demand primarily from 3PLs, advanced manufacturing, and data center-related tenants. We have now leased 2.5 million square feet to data center-related tenants since the start of 2025. This data center-related leasing activity accounted for 26% of all of our new operating portfolio leasing during that same period. The table is set for us to see upward pressure on rent growth in many markets as

leverage gradually shifts back to the landlord.

We expect our market rent growth for next year to be in the range of 2% to 4%, an acceleration as compared to the 1.6% market rent growth expected for 2026. Geographically, the strength has been most pronounced in the markets where STAG is concentrated. Acquisition volume for the third quarter totaled $107.9 million. This consisted of two buildings with cash and straight-line cap rates of 6.9% and 7.2%, respectively. Subsequent to quarter-end, we acquired one building with $55 million at a cash and straight-line cap rate of 6.7% and 7.1%, respectively. In terms of our development platform,

we have seven buildings or 1.8 million square feet of development activity

that is not in service as of the end of Q3. These buildings are in various stages of development and have an expected stabilized yield of 7%. We executed two development leases this quarter, totaling 69,000 square feet. The first was a 47,000 square feet lease at a resource drive building in Reno, bringing that building to 62% leased. The other was for 21,000 square feet at our Piedmont Commerce Street building in Charlotte, bringing that building to 100% leased. With that, I will turn it over to Matt, who will cover our remaining results and guidance for 2026.

Thank you, Bill, and good morning, everyone. Core flow per share was $0.66 for the quarter, an increase of 1.5% as compared to last year. Net debt to annualized run rate adjusted EBITDA was equal to 5.1 times, while liquidity stood at $546 million. During the quarter, we commenced 30 leases across 3.6 million square feet, generating cash and straight line leasing spreads of 23.8% and 35.7% respectively. Retention for the quarter was 90.3%. Same score cash and wide grew 3.5% for the quarter and 3.9% year to date. Year-to-date same-store cash-in-wide growth of 3.9% includes approximately 30 basis points of benefit related to a single tenant whose rent was unpaid as of the third quarter of 2025 and substantially collect in the fourth quarter of 2025. The benefit reverses in Q4, and we expect full-year same-store growth within our guidance range, which we revised upward since our last earnings call. Moving to capital market activity, as discussed on our last call, we did repay the $50 million private placement note B, which matured on July 1st. Also mentioned on our last call in July, we combined our term loans A and F, both of which were set to mature in March of 2027, into a single $350 million term loan, maturing in January 2032. The swap fixed rate is 3.53% until March 2027, and 4.79% from then on until maturity. We also repriced our revolver in all of our term loans, saving five basis points across our bank debt. As of today, the company has total forward equity net proceeds of $70 million available to settle at our discretion. We're pleased to announce that in August of this year, STAG received an investment grade rating from S&P Global Ratings. S&P has signed a rating of BBB to STAG with a stable outlook. The company also maintains an investment-grade rating of BBB with a stable outlook from Fitch and an investment-grade rating of B882 with a stable outlook from Moody's. Moving to guidance, we have made the following updates. Average same-store occupancy guidance has been increased to a range of 96.75% to 97.25%, an increase of 25 basis points at the midpoint. Cash same-store growth guidance has also been increased from a range of 3% to 3.5% to a range of 3.5% to 3.75% for the year. This increase is driven by the upward revision of occupancy expectations and lower-than-expected cash credit loss. We have narrowed the range of expected acquisition volume to a range of $530 million to $600 million. We now expect a stabilized capitalization rate range between 6.3% and 6.4%. G&A guidance has been increased to a range of $56 to $57 million. These guidance changes result in an increase in corporal guidance to a range of $2.64 to $2.66 per share, an increase of $0.02 at the midpoint. 2026 guidance can be found on page 21 of our supplemental package, which is available in the investor relations section of our website. I will now turn the call back over to Bill.

Thank you, Matt, and thank you to our team for their continued hard Thank you.

We will now be conducting a question-and-answer session. We ask that each participant limit themselves to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we pull for questions. Our first question is from Craig Mailman with Citigroup.

Please proceed with your question.

Good morning, guys. Bill, appreciate your comment on your market rent growth expectation for 2027. Apologies if I missed this, but did you discuss where you think rent spreads are coming in and maybe give us an update on progress on 2027 expirations to date? I know you used to give this metric in the press release.

Yeah, hey, Craig. Yeah, we didn't include that, but I can give an update now. We're about 40% through our 2027 leasing plan. Those spreads on the 40% were 12% cash roll over spreads. The one nuance there is almost all of our fixed renewal options are in that 40%, so when you take those out, the spreads on that 40% was 17.5%. We expect leasing spreads next year to be around 15%.

Okay, that is helpful. And I know you guys, I'm asking for 2027, now I'm going to get greedy and ask for 2028, but a lot of the questions I'm getting are just, you guys and some of your peers have talked about the sort of mid to high teen spread for next year. Can you just walk us through the math or how we should think about maybe a normalized rate of D-cell or where like 28, 29 could be from a rent spread perspective on a cash basis and just kind of walk us through the math and what that could look like?

Yeah. I mean, do you want to go out to 30 and 31, too, or no? Hey, listen, if your crystal ball is that good, go for it. No, I understand the question. The way we look at it, I mean, with moderate market rent growth, we're probably in the, you know, the low double digits to mid double digits of leasing spreads as you kind of move out to 28 and 29. I mean, it kind of wouldn't say it bottoms out in 27, but it should be pretty steady from here on out.

Perfect. Thank you. You're welcome.

Our next question is from Nick Tillman with Baird. Please proceed with your question.

Hey, good morning, guys. Maybe you wanted to comment or get your thoughts on the updated deployment strategy. Obviously, the board's authorizing the buyback here. As you look across acquisitions with the interest rate rises, are you seeing more opportunities there, or do you see opportunity on the buyback? I guess weighing all the buckets you can pick at, where are you seeing the best opportunity to deploy capital today?

Yeah, it's interesting, Nick. I mean, it changes. The good thing is the buyback, it's another tool in our toolkit here. So when that's the best use of capital, we'll deploy it to that. And if we can find stabilized acquisitions at higher yields that we like those assets in those markets, we'll deploy it there. And, you know, historically, or at least in the, you know, the past year, two years, we've seen as developments has been our best opportunity to deploy capital. Right now, we're, you know, those developments are yielding 7% plus, and build the suits a little bit inside of that. We saw we were able to pick off some nice acquisitions. And in this quarter, I think those came in at about a 6-9 cap rate. So we'll look across all those opportunities. And frankly, if none of them are what we view as a good opportunity to pull capital, then we won't do any of it. So, we've done a good job of allocating capital in the past, and this just gives us another tool to use if we see that as the best opportunity.

And then maybe for my follow-up, just on the overall development, leasing, and the progress you're seeing at some of your projects, I believe you guys underwrite 12 months post-completion for lease-up for a lot of these projects. So maybe just some of the bigger ones, how discussions have progressed on that front, and where the overall tenant mix and how far along we are within the pipeline executed deals.

Yeah, I can pass it over to Steve to walk through the details there. But I will say our disclosure have developments that we've placed in service that are well within the 12-month lease up. So I think that, you know, that's something that needs to be factored into when you look at the progress on developments.

Yeah, thanks, Phil, and thanks, Nick. I get a few questions on the development side, so let me frame it a little bit first. We've kind of – this is becoming a core part of our business with over 100 million, you know, annual starts, and we expect that to trend up as we go forward. So, if you're looking at page 10 and 11 of the supplemental, you know, we're tracking over $500 million of investment in 16 buildings, and we've spread that out across 11 markets and with 20% plus in the build-to-suit category. So, and as you two were just mentioning, we do underwrite 12 months of downtime for the spec construction. I think that's why Bill directed you to the couple of deals that we have stabilized and put into service. As of September 30th, and those two are obviously 100% occupied. If you put those together with the assets that we're working on right now that are complete but not in service, that bring that occupancy number up a little higher to, like, 37%. But on the $1.8 million as a total that we have active projects to work on, let me just walk you through them quickly. In the under construction side, because I think there's some good news there, we're in Kansas City with 198,000 square foot deal. That's a 4% vacancy market, and we've had excellent activity on that, Nick. So we feel very good about that project. Dallas, that's a build to suit for 343,000 square feet. So construction's on time, and we expect that delivery to be smooth. And the third project is Phoenix, and we're only breaking ground in Phoenix right now and just starting that construction. But it's 184,000 square foot project in West Chandler, which is just off the I-10, and the Phoenix dynamics of that market continue to improve with vacancies moving down closer to nine. They were a little bit higher prior to that. So there's a lot of activity in Phoenix, and we feel really good about those projects. So the under construction bucket, 48% leased. There are 2027 deliveries, and we think we'll lease up and feel comfortable with that 12 months of downtime. When you move to the more highlighted section, the complete not in service, we're really looking at three markets. I think the first property that's listed there, resource drive, we only have 28,000 square foot left to lease there. That's currently being demised with office built out. We expect that will be lease up pretty quickly. You move down to Reno, the Mount Anderson building, the 284, and candidly, that's the one project that probably sticks out that has the most leasing risk right now. The Reno market, when it comes to pure distribution fulfillment uses and the submarket we're in, in North Valleys, has been slower. Now, the good news there is the trend is that vacancy is coming down. Absorption picked back up in the fourth quarter of 25 and has been consistently positive. But we do have some leasing challenges in the Reno North Valley's market as the traditional fulfillment logistics users have not pushed back out to Reno. So we do have activity there. We've had activity since we delivered it. We just haven't landed those deals as they tend to be multi-market opportunities, and there's a lot of competition. Moving down to Charlotte. Charlotte is on the list here, but remember, that was a two-building development. The first building leased within seven months. We did four leases in that building, just systematically leased it up. We are very active on the building that shows here, the 200,000, and those leases you can expect will come in at 40,000 to 50,000 square foot leases, and I would expect we'll have three or four leases to lease up that final building. When you put the two buildings together, we should average 12 or 13 months of downtime to stabilization. So feeling good about that market and the progress that we have in Charlotte. And then the large project that really jumps off the page is our 500,000 square footer in Louisville. Again, a very healthy market, a 5.9% vacancy. We're in the right park. We're in the right sub market. And there's been a lot of very positive activity in that market with some of the competing buildings being taken down, and we are active as well with prospects for that building. So, in general, we feel pretty good about the complete not-in-service portfolio.

No, that's very thorough, and I appreciate the time, guys. Thank you.

You're welcome.

Our next question is from Dave Rogers with Raymond James. Please proceed with your question.

Yeah. Hey, good morning, guys. I wanted to ask about the step up in earnings from 3Q to 4Q. It's a pretty strong increase, you know, sequentially for this late in the year. So was leasing just well ahead of expectations? You know, is the business just performing better than anticipated? And then you mentioned the same store kind of split between 3Q and 4Q. Can you quantify kind of what that looks like from the tenant last year?

Yeah, absolutely. Hey, Dave. Good morning, Max. You're right. You know, if you were to take a look at the midpoint of our guidance, we would expect the step up in Corfo for the fourth quarter. One of the drivers is the fact that what we acquired this quarter occurred literally in the last week of September, so you can get a full quarter of economics on the 6.9% cap rate deals. And then the same score, right? We increased occupancy credit losses, trending much better than we'd initially projected in February. We did moderate our expectation of credit loss in the last call, and we continued to outperform there. Those are the two biggest drivers. And was there a second part to your question?

So, you know, you had mentioned that there was a same-store NOI kind of impact from the tenant last year. And I don't know if that's going to be a bigger impact or what's that look like from a quantification standpoint.

Yeah, absolutely. So, the simple answer is cash same-store is 3.9% year-to-date. And if you adjust the timing, which I'll walk into a second, that 3.9% would be 3.6%. So just to kind of back up and reframe what occurred, a tenant last year in the third quarter was affiliated with the first brand's bankruptcy. We moved them to cash basis. There was kind of a disruption in communication. They're domiciled in Europe. They did not pay rent in the third quarter. They fully paid the third quarter rent and the current rent in the fourth quarter. So no payment In the third quarter, double payment in the fourth quarter. Again, on a calendar year basis, no impact. But on quarter to quarter, you know, Q3 artificially high due to the favorable comp, and it would reverse in the fourth quarter. I think really the story here, Dave, is our 3.9% year-to-date, if you account for this timing mismatch in 2025, 3.9 is 3.6%, which is basically the midpoint of our updated guidance. Does that clearly answer that question?

Yeah, I got that. Thank you. That's helpful. And then just as a follow-up, I think Nick asked a good capital allocation question earlier. But I'm curious if you change that math instead of just saying where do we put money, but where can we raise money? If you guys kind of looked at the convert market or something to maybe lower initial borrowing costs, take advantage of the backup and cap rate, that convert market probably lets you issue equity in the mid, you know, low to mid 40s, which is above the 39 where you seem comfortable. So, curious if maybe changing that equation of how do we raise money maybe more accretively today to take advantage of this backup and cap rates because this could help you drive growth even more. Is that something you're thinking about?

Yeah, Dave, we evaluate everything. We're obviously very familiar with the convert market. You know, the good news is, look, we have a revolver balance of $500 million. We have $70 million of unfunded equity. We retain $130 million of cash after dividends paid. So we don't really need additional capital right now. You know, we would raise capital in the sense that we saw opportunities to deploy it, but where we are right now with where our balance sheet is, our liquidity, and our retained cash flow, we're in a very comfortable spot capital-wise.

All right. Thanks, guys.

Our next question is from Michael Griffin with Evercore ISI. Please proceed with your question.

Great, thanks. Maybe just starting on the acquisitions environment, I saw the cap rate guidance ticked up marginally. I imagine that was largely due to the acquisitions in the third quarter. But have you gotten a sense, if you've seen any repricing or retrading on deals, just given the volatility in interest rates recently, curious if buyer or seller expectations have moved, if bid-ask spreads widened, any additional color there would be helpful?

Yeah, hey, Michael, this is Mike Chase. Appreciate the question. I mean, it takes a little while for the volatility to push through the market, but there has been some indications of, you know, higher retrades and general repricing on deals that are coming to market. You know, I'm not, you know, the cap rate, you know, the movement in cap rates will take a little bit to flush through the system, but I would say so far, you know, I would say it's probably somewhere in the 25 to 30 basis points based on kind of the retrades we've heard about. Some of those retrades are happening, and some of the sellers are saying no, and either waiting to see what happens with the capital markets and the kind of market volatility, or buyers are pushing through. So we have seen a few retrades here and there, or been hearing about them.

Yeah, we expect it to stabilize, you know, LLS being equal, you know, 25 to 35 base points higher than what it was this year. And the reason for the lag generally is, you know, 1031 buyers hold up pricing for a little bit. And that usually, as Mike was saying, flushes through within three to six months. And with respect to our guidance, yeah, really our guidance was moved and represents very little acquisition activity for the rest of the year just due to the uncertain capital markets environment.

So I certainly appreciate the context there. And then, Bill, just going back to your comments and the prepared remarks about continued improvement in industrial fundamentals, you know, as you talk to your big customers, your big tenants out there, I mean, what are they saying is the reason for this increased demand? Is there more certainty in their business? And, you know, do they just feel more confident about the macro outlook and the need to leave space? And then just also, if you could add anything, whether proposal activity, decision timelines have shrunk, you know, some commentary around that would be great, too.

Yeah, I mean, what we're hearing, and there's a couple of demand drivers, and this has been pretty consistent for the past six, 12 months, and even further, I guess, is our large, sophisticated tenants, global tenants, have said they've wanted to diversify supply chains for years, and that dates back to port strikes and water levels in the Panama Canal and, for a number of reasons, diversification of supply chains. It's important for the business because the disruption is very costly to them. So that takes years and years to implement. And part of that is on-shoring manufacturing. It's bringing goods into the U.S. through other ports. It's near-shoring. So that is a demand driver we're seeing. We're also seeing for a couple years there, there was a lack of demand, I would say. A couple years were the lowest level of demand we've seen in industrial in a decade. That created some pent-up demand, and so those tenants are in the market and active. And so I think there is confidence in their businesses. Obviously, oil prices are driving some issues with the economy and driving inflation, but overall, business activity remains really strong, and that's a big driver of demand. With respect to call at least gestation periods, those have shortened, certainly in markets where vacancy has dropped. I mean, one of our bigger markets is probably more unique to us, Greenville, Spartanburg. I mean, there's some buildings there that over 300,000 square feet, Class A facilities beginning at 25, there was double-digit vacancies. That's close to zero now. So that's a market where, you know, if tenants are looking for space, they're acting really quickly to take it down because they're going to lose it. And that, when you have urgency in markets, when you have vacancy rates coming down, that shortens the lease gestation periods.

Great. That's it for me. Thanks for the time.

Thank you. Our next question is from Jason Belcher with Wells Fargo. Please proceed with your question.

Hi, good morning. Matt, just thinking about the ratings upgrade from S&P in August, can you touch on how that might change the calculus on tap in the public unsecured market, and maybe tell us where you think you could price a 10-year offering today?

Yeah, absolutely. So this is our inaugural rating, actually, from S&P. Previously, we had Moody's and Fitch, which is BBB stable, Moody's at BAA2 stable. And then we originated the S&P rating at BBB stable. And to your point, that was what we felt was a gating item to enter the public bond market. We were looking at the market earlier this year. You know, the capital market world changed. Capital deployment has slowed. So, like I explained to Dave Rogers, we don't really have a need for long-term debt capital at this point, again, with $500 million plus liquidity and the unfunded forward plus the retained earnings. But to directly answer your question, if we were to go to the public bond market, we'd likely look at the five-year tenor. If we looked at the five-year tenor, spreads are anywhere between 100 and 110 over. If we were to look at the ten-year, you know, add an additional 20 basis points to that credit spread. So, to kind of sum that up, the all-in coupon rate on a five-year public bond with our three ratings would be a little below 6% and closer to 6.25, 6.4 in the 10-year. But again, to reiterate, we're not actively looking at that market. We do not have a need for long-term debt capital right now.

Understood. Thank you. And then just if you could give us an update on your tenant credit profile, if there are any tenant industries that are giving you more concern than others currently. And that would be how that's trended over the past couple quarters.

Yeah, absolutely. Happy to report, I really don't have a change to answer this question from 90 days ago. You know, tenants come on or come off, et cetera. But, you know, the theme really is, it's not necessarily sector or business line. It's smaller businesses with higher leverage in low margin businesses. Think furnitures, for example. You know, we've incurred 12 basis points of credit loss through the third quarter. We started the year at a 50 basis point expectation. We lowered that last quarter when we spoke in July. The outperformance of credit loss, which is a weird way to say it, but doing better than what we expected is one of the primary drivers of the increase of our same-store guidance this quarter.

Great. Thanks a lot.

Our next question is from Eric Borden with BMO Capital Markets. Please proceed with your question.

Great. Thanks, everyone. Thanks for taking my question. Not getting too far ahead of 27 Guidance, but could you just help us think about the building blocks for a cash-same store outside of, you know, contractual rent bumps and the leasing spreads that you were previously discussed? You know, is there anything meaningful from a free rent burn or the timing of cash commencements that we should keep in mind?

No, nothing from a free rent perspective. When you think about the building blocks, as you noted, it's contractual escalators, which are around 3%. We've got leasing spreads, which, as I noted, we're targeting around 15% for next year. Occupancy is a material driver. We had some occupancy loss this year. I think we've explained it numerous times. But just assume flat occupancy for next year. And then we bake in 50 basis points of credit loss, right? So you can back the envelope that and you're going to be, you know, close to the mid single digits, you know, circa 5 percent. Great.

And then just on the fixed renewal options, how much of the portfolio still has those embedded? And how is that exposure trended over time? You know, as you negotiate leases today, are you Generally able to move away from those fixed options, or are tenants still asking for it?

Yeah, those are not in any of our kind of form leases. When we sign new leases, those aren't in there. These are, when you acquire a lease, you acquire a building subject to a lease, you acquire the lease. And sometimes those are in there, and sometimes it takes a couple of renewals to get through those fixed renewal options. So it's, you know, 2-3% of our portfolio, maybe even 5%. But I think the impact on leasing spreads every year has been consistent the last three years. So, you know, we try not to back them out of our numbers. They're part of our numbers. You know, the good thing is you're just kicking the can down the road with respect to the rollover rents for those. So we'll get those market rents at some point. But it's really, year over year, it's not really an impact to the same store.

All right.

Thank you very much. Our next question is from Henry Newell with RBC Capital Markets. Please proceed with your question.

For Michael Carroll this morning, thank you for taking my question. Just wanted to move back to the acquisition pipeline for another moment. And it's a pretty big pipeline. Can you quantify, really, what portion of this pipeline is maybe in the later stages of negotiation? And would we expect acquisitions to increase in 4Q and moving into 2027?

Yeah, so the pipeline, our pipeline may be, you know, maybe different than others. The way we define it is, you know, deals that we are evaluating, have underwritten, you know, maybe they're back on the market. Maybe we're talking about them internally. They're at various stages. So, you know, it's a pretty healthy number, but those are all the deals we're evaluating in the market. Some of those deals are – the pricing is too rich for us, but we hang around the hoop, and if they can – if the pricing changes, then we'll be there. So, for us, I mean, when you look at that pipeline, I mean, historically, you know, our hit rate on that pipeline is really low. So, when I think about acquisition guidance for the year, you know, we updated that. We spent a lot of time on it. It's not really factoring in additional, many additional acquisitions this year just due to the uncertain macro environment. And with respect to next year, we'll evaluate the opportunity, we'll evaluate our capital, and we'll buy what makes sense based on our free cash flow and our liquidity. And that's the calculus we use for next year's acquisitions and, frankly, every year acquisitions. So it's hard to pinpoint a number at this point.

Great. I appreciate that context. And then just on the demand side of things, in Q3 and Q4 to date, are you guys continuing to see a lot of really data center adjacent demand? And are you seeing this emerge more or less in any specific markets?

I mean, the markets where we're seeing it is where the data centers are, right? I mean, you're seeing them in the Midwest and the Southeast and Texas. And frankly, we've had some really good success on leasing to data center related tenants. And there's been a lot more leasing that, you know, frankly, just hasn't made it into our portfolio because we have buildings in those markets that are occupied. When you look at 2025, last year, I think it accounted for almost 20% of our new leasing, and year-to-date 2026, it's about 30% of our new leasing. The good thing is these are long-term leases. The weighted average lease term is between six and seven years, really good credits. These leases are supporting the ongoing operations of data centers. But I do want to know what's important here is that these buildings were already built, were in these markets, and were there to service other demand drivers within these markets. This is just another incremental demand driver in these markets. So a lot of these buildings were leased to either regional distributors, servicing the local economy, servicing a plant nearby. So our buildings in these markets were there for other reasons. This is just an incremental demand driver.

Wonderful. Thank you, and congrats on another strong report. Thank you. Our next question is from Jessica Zhang with Green Street.

Please proceed with your question.

Hi. Good morning. So in the last earnings call, you mentioned El Paso as one of your weaker markets in terms of market rent growth. Can you just walk us through your thesis on the El Paso acquisition in this quarter?

Yeah, we like El Paso. We like the long-term fundamentals in that market. The El Paso acquisition had a little over five years of lease term. It's right near the bridge where a lot of the demand is in El Paso, especially cross-border demand. So, for us, El Paso is going to, we think, have some short-term struggles, but long-term, we really like the market. So, that was the thesis behind that acquisition.

Great. Thank you. And then maybe just additionally, I'm curious, what drove the increase in the G&A guidance this quarter?

Absolutely. So, the midpoint of G&A increased $2 million with their updated guidance. It's not one item. It's a collection of items. It includes internal employee adjustments. We have some new hires. You know, every year we have normal course, annual service provider fee increases, true-up of the short-term incentive program. So, it's not one thing. It's a collection of things, but added together, you know, we did increase our G&A guidance.

Okay, that's very helpful. Thank you.

Our next question is from Sydney McGinty with JPMorgan Chase.

Please proceed with your question.

Hi, guys. So in your opening remarks, you mentioned expecting rent growth in the 2% to 4% range next year. Can you just talk a little bit specifically on any green shoots you're seeing in any of your markets in particular that might be making you feel better about market rent growth?

Yeah, I mean, we operate in a lot of markets, so it's hard to go market by market, but because it's one of our top markets, I'll go back to the Greenville Spartanburg. I mean, even market occupancy last year, I think, was in the vacancy rates were in the double digits. It's probably mid-single digits now, and depending on the product type, it's lower, right? I think I mentioned over 300,000 Class A is close to 0%. So when you look at market rent growth, you also then have to further, you know, look at product type and what assets are in those markets. You look at Columbus, great success in that market, a lot of big box leasing. It's a big box market. So you're getting really strong market rent growth for big box distribution assets in that market. If you've got a smaller box asset there, your market rent growth is probably not as strong. So we take a market-by-market look, layer on our view of our assets in those markets, and that's where we come up with our market rent growth of 2% to 4%. This year, we had 0% to 2% market rent growth, and I think we're 1.6% year-to-date, so trending on the higher end of that range in our portfolio. And, you know, we'll see how 2027 shakes out, but we feel really good about the fundamentals and how our assets fit in those markets.

Okay, great. And then maybe as a follow-up to the acquisition talk earlier, could, you know, this rate volatility in the macro environment in the acquisition market currently maybe create an opportunity to acquire assets from smaller developers who might be facing, you know, higher financing costs or watch list exposures now?

Absolutely. This is part of our business, and we were able to find some great opportunities in Q3. You turn the clock back six months, we're not able to acquire those assets for a 6-9. I think one of them, we just talked about the El Paso asset. I think there's some noise there with the short-term fundamentals in that market, but long-term, we really like the market, and we've got a five-year lease to a good credit. So, we'll be able to get through the short-term market issues there, and we got it at a really strong cap rate. So, yeah, there'll be opportunities, and we'll look at them, and hopefully we'll be able to take advantage of them.

There are no further questions at this time.

I would like to turn the floor back over to Bill Crooker for closing comments.

Yeah, just thanks, everybody, for joining the call, and thank you for the questions, and we look forward to seeing you soon at the upcoming conferences.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.