Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
EastGroup Properties, Inc (NYSE: EGP) Q1 2026 Earnings Call dated Apr. 23, 2026
Corporate Participants:
Marshall A. Loeb — Chief Executive Officer
Unidentified Speaker
Reid Dunbar — President
Staci H. Tyler — Chief Financial Officer
Brent W. Wood — Chief Operating Officer
Analysts:
Craig Mailman — Analyst
Blaine Heck — Analyst
Samir Khanal — Analyst
Todd Thomas — Analyst
Nicholas Thillman — Analyst
Brendan Lynch — Analyst
Alexander Goldfarb — Analyst
Michael Griffin — Analyst
Richard Anderson — Analyst
Michael Mueller — Analyst
John Kim — Analyst
Vikram Malhotra — Analyst
Michael Carroll — Analyst
Ronald Kamdem — Analyst
Jessica Zheng — Analyst
Unidentified Participant
Presentation:
Operator
Good morning ladies and gentlemen and welcome to the East Group Properties First Quarter 2026 Earnings Conference Call and webcast. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, April 23, 2026. I would now like to turn the conference over to Marshall Loeb, CEO. Please go.
Marshall A. Loeb — Chief Executive Officer
Good morning and thanks for calling in for our first quarter 2026 conference call. As always, we appreciate your interest. I’m happy to say that joining me on this morning’s call are Reid Dunbar, our President, Stacy Tyler, our CFO, and Brent Wood, our coo. Since we’ll make forward looking statements, we ask that you listen to the following disclaimer
Unidentified Speaker
Please note that our conference call today will contain financial measures such as PNOI and FFO that are non GAAP measures as defined in Regulation G. Please refer to our most recent financial supplement in our earnings press release, both available on the Investor page of our website and to our periodic reports furnished or filed with the sec for definitions and further information regarding our use of these non GAAP financial measures and a reconciliation of them to our GAAP results. Please also note that some statements during this call are forward looking statements as defined in and within the safe harbors under the securities act of 1933, the securities Exchange act of 1934 and the Private Securities Litigation Reform act of 1995.
Forward looking statements in the earnings press release along with our remarks are made as of today and reflect our current views of the Company’s plans, intentions, expectations, strategies and prospects. Based on the information currently available to the Company and on assumptions it has made, we undertake no duty to update such statements or remarks, whether as a result of new information, future or actual results or otherwise. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially.
Please see our SEC filings, including our most recent Annual Report on Form 10K, for more detail about these risks.
Marshall A. Loeb — Chief Executive Officer
Good Morning. I’ll start by thanking our team. They started the year well and I’m proud of the results achieved our first quarter results demonstrate our portfolio quality and resiliency within the industrial market. Some of the stats produced include funds from operations omitting of voluntary conversions of 230per share up 8.5% quarter over quarter. For over a decade now, our quarterly FFO per share has exceeded the FFO per share reported in the same quarter prior year. Truly a long term growth trend.
Quarter end leasing was 96.5% with occupancy at 95.9. Average quarterly occupancy was 96.1 which was up 30 basis points from first quarter 2025. And also notable was quarter end same store occupancy at 97.4%. This strength demonstrates the trend we’ve mentioned where the portfolio is well leased while development leasing has been taking a little longer. Quarterly re leasing spreads were 37% GAAP and 20% cash for leases signed during the quarterly. During the quarter quarterly cash same store NOI rose a strong 9.2% reflecting this high same store occupancy.
Finally, we have the most diversified rent roll in our sector with our top 10 tenants falling to 6.7% of rents down 40 basis points from prior year. We target geographic and tenant diversity as strategic paths to stabilize earnings regardless of the economic environment. In summary, we’re pleased with our results and excited about the quantity of development leasing signed during the quarter Prospect activity. Reid will now walk you through more of our quarterly details.
Reid Dunbar — President
Thank you Marshall and good morning. In the first quarter, development leasing continued to follow the same trend we saw in our fourth quarter results. Year to date, development leasing has already reached 54% of last year’s total. While we are encouraged by the continued demand in our development properties, businesses continue to operate amid headline volatility and decision cycles continue to remain extended. But as the markets continue to experience positive absorption and as new development starts remain limited, we anticipate users will be increasingly required to accelerate decision making.
In the meantime, our development pipeline continues to lease at a more measured pace while maintaining our projected yields. The E3 platform and the depth of our team continue to drive strong returns in our development business. As our development starts are pulled by market demand, we are increasing our guidance for the year to 265 million. This quarter we commenced construction on four projects totaling 586,000 square feet, of which 27% is pre leased. New development sites in our targeted infill locations remain challenging to source and entitlements and zoning continue to be difficult and time consuming.
As the supply of competing product continues to tighten and as demand stabilizes, it will place upward pressure on rents. And as demand improves, we believe the company is well positioned to capitalize on continued development opportunities in creating value from our land bank. Regarding new investments, we continue to modernize our portfolio with the acquisition of two Class A buildings in the Jacksonville market totaling 177,000 square feet and then subsequent to quarter close we sold a 46,000 square foot building also in Jacksonville along with our previously announced exit from the fresno market of 398,000 square feet.
Stacy will now speak to several topics including assumptions within our updated 2026 guidance.
Staci H. Tyler — Chief Financial Officer
Thanks Reid and good morning. We are proud of our first quarter results. They reflect the outstanding performance of our team and the strength of our portfolio. We are pleased to report that FFO exceeded the midpoint of our guidance range at $2.30 per share excluding gains on involuntary conversion. This represents an 8.5% increase over first quarter last year. The outperformance in first quarter was primarily driven by lower than anticipated G and A expense and higher than projected property net operating income reflecting the continued strong performance of our 62 million square foot operating portfolio.
Our balance sheet remains strong and flexible. We were pleased to announce during first quarter that Moody’s ratings upgraded our issuer rating to Baa1 with a stable outlook. We ended the quarter with no balance drawn on our unsecured bank credit facility leaving available capacity of $675 million. Our sector leading balance sheet metrics include debt to total market capitalization of 14% at quarter end first quarter annualized debt to EBITDA ratio of 3 times and interest and fixed charge coverage of 14.8 times.
We remain well positioned to pursue growth opportunities that align with our time tested Strategy. FFO for second quarter is estimated to be in the range of 230 to 238 per share. Looking ahead to the remainder of the year, we increased the midpoint of our 2026 FFO guidance to $9.52 per share excluding gains on involuntary conversion. The updated Midpoint represents a 6.4% increase over 2025 actual results and is 30 basis points ahead of our initial guidance. We are projecting strong cash same property net operating income results to continue and we raised the midpoint of our guidance assumption by 10 basis points to 6.2%.
These strong projections are driven by rental rate increases on in place and budgeted leases and expected same property occupancy of 96.4% which is also 10 basis points ahead of our initial guidance. We increased our projected 2026 development starts by $15 million to $265 million primarily driven by the 100,000 square foot pre leased building expansion that was not contemplated in our prior guidance figure. We began construction on four projects during first quarter and one project in April totaling $105 million and the remaining starts are projected for the second half of the year.
While our guidance assumption for 2026 gross capital proceeds remains unchanged at $300 million. The nature of those proceeds has changed from 100% debt to a mix of debt and equity as we were opportunistic in accessing the equity market. During first quarter, we issued $70 million in common stock through our common equity offering program at over 191 per share. We currently have an additional $50 million in forward equity sale agreements available for issuance at over 196 per share. We will continue to evaluate capital sources and remain flexible as the year progresses.
Our rent collections currently remain healthy and our tenant watch list is steady. We are pleased with our strong performance in first quarter and as we look ahead through the remainder of the year 2026, we are confident in our experienced team and well located high quality portfolio to position us for long term success. Now Marshall will make some final comments.
Marshall A. Loeb — Chief Executive Officer
Thanks Stacy. In closing, we’re pleased with how the year has begun. Market demand has momentum and we’re hopeful it’s sustainable regardless of the environment. Our goals are to drive FFO for share growth while raising portfolio quality. If we do those, we’ll continue creating NAV growth for our shareholders. Our executive team restructuring is nicely falling into place. I’m excited to welcome Jim Traynor to the team. I also want to express my and the company’s appreciation to John Coleman who is entering a well earned retirement on June 30th.
And John, we still have your mobile number. Stepping back from the near term, I like our positioning as our portfolio is benefiting from several long term positive secular trends such as population migration, near shoring and onshoring trends to now include data center suppliers, evolving logistics chains and historically lower Shallow bay market vacancies. We also have a proven management team with a long term public track record. Our portfolio quality in terms of buildings and markets improves each quarter, our balance sheet is stronger than ever and we’re upgrading our diversity in both our tenant base as well as our geography.
We’d now like to take your questions.
Questions and Answers:
Operator
Thank you ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the 1. On your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press Star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. We kindly ask that callers limit themselves to one question at a time. If you have a follow up question, please rejoin the queue One moment, please, for your first question.
Your first question comes from Craig Mailman with Citigroup. Your line is now open.
Craig Mailman
Good morning. I guess Marshall and Reid, you both kind of pointed to development leasing taking a little bit longer still, but you guys had a significant ramp in kind of the activity since early February. Can you just talk a little bit about the gestation period on the deals that got done? And are you seeing some tenants start to move a little bit quicker now that the supply pipeline is emptying out here?
Reid Dunbar
Yeah. Morning, Craig. This is Reed. Thanks for the question. And we are actually seeing some tenants move a little bit quicker than we have in the past. We had a good example of that in our Atlanta. One of our Atlanta projects where we had a vacancy in our second gen, or, excuse me, our first gentleman development portfolio. And we had two users that came and both wanted the space, and we were able to create some competition. The team did locally and ended up signing 107,000 square feet in that project.
And that happened quicker than we anticipated, which was a good sign. And so as we look out in the market, as the demand continues to pick up and supply continues to get a little tighter, we anticipate that. That that decision cycle will start to shorten some.
Craig Mailman
Just if I could sneak a second quick one in, how much availability do you still have left of the projects that you delivered last year that came in a little bit under leased?
Reid Dunbar
Yeah. So what we’re calling, you know, first gen space, we’ve got about 775,000 square feet.
Craig Mailman
Great, thank you.
Operator
Your next question comes from Blaine Heck with Wells Fargo. Your line is now open.
Blaine Heck
Great, thanks. And good morning. Just with respect to guidance, can you talk about how much speculative development leasing is assumed in guidance for the rest of the year and whether at this point you think that could be a risk or a source of upside?
Staci H. Tyler
Hi, Blaine. Good morning. Yes, so we have about 4 cents of NOI for speculative development leasing in the second half of the year. We’re not assuming anything in second quarter at this point for spec development leasing, and it ramps up the third and fourth quarter for a total of 4 cents for the year. We see that more as an opportunity. Certainly we have work to do and we need to sign some more leases to achieve that 4 cents. But we believe that that’s an opportunity between the projects that we have currently in the development pipeline and the 775,000 that Reid referred to in first generation.
So definitely see that as an opportunity, particularly if the pace of development leasing can remain strong and steady as it has been over the last couple months.
Operator
Your next question comes from Samir Kanal with Bank of America. Your line is now open.
Samir Khanal
Good morning, everybody. I guess, Marshall, it’s only good to see the development leasing picking up here, but maybe expand on your comments on kind of what you’re seeing from the customer as it relates to kind of overall decision making given kind of inflation, given macro volatility, I guess what are you seeing on the ground? Thanks.
Marshall A. Loeb
You’re welcome. Good morning, Samir. I agree with Reid and that maybe going back a year ago after Liberation Day, it felt like later into second quarter and certainly through third quarter, things were slow. You know, we were getting small development leases signed. We weren’t seeing many expansions. Fourth quarter it picked up, that was our by far our biggest development leasing quarter. And then again then we beat that number this quarter. So a couple of strong quarters in a row where some of that development leasing, we picked up a couple of expansions.
You saw the building expansion in Arizona. There’s one in Texas where it’s an expansion. So it feels like in spite of and I got the question, you know, the unrest in the Middle east, is it slowing down decision making? And I could give you two answers. The current one is no. It really we have not seen people say I’m not ready to make a decision because of that or not yet. We do worry about gas prices and what impact, how that will affect the consumer over time could affect us. But today I feel better, for what it’s worth, I feel better about this year today than when we had our fourth quarter call, in spite of all the headlines and things like that.
And maybe, you know, I’m overanalyzing our customers. It’s people are more, they need to run their businesses and they’re getting more used to the volatile headlines that the Strait of Hormuz is open, it’s closed, it’s this and that and that business is generally good. And we’re seeing new leasing and develop and expansions again, a little more than
Blaine Heck
We did a year ago.
Marshall A. Loeb
I just hope it lasts.
Samir Khanal
Thank you, Marshall.
Marshall A. Loeb
Sure. You’re welcome.
Operator
Your next question comes from Todd Thomas with KeyBank. Your line is now open.
Todd Thomas
Yeah, hi. Thanks. Marshall, you mentioned seeing some tailwinds around demand due to data center suppliers. And, you know, I was just curious if you could talk about that a little bit, perhaps quantify or characterize that demand a bit in the context of what was, you know, what’s been signed, you know, sort of year to date, whether it’s data center Suppliers or advanced manufacturing. Any thoughts there?
Marshall A. Loeb
Good morning, Todd. I think it started with us with maybe the advanced manufacturing or the chip plants. We’ve got suppliers in Phoenix and in Dallas for the chip plants that kind of picked up maybe two years ago. Call it. I’m trying to think the exact timeframe has been. And those are still tenancies we have today. And then with data centers we’re seeing mostly on the supply side but a couple that you saw in our kind of on our development program it’s more H Vac or racking equipment and things like that where a couple of full building users that were related to data center basically that have been built and they’re supplying them.
We’ve got another prospect or two that are related to data center construction. So we’re look, I’m thrilled to have a new source of demand and we what we love about our buildings is how flexible the use can be that our long standing tenants are still there. Look, I’d love home building to pick up again one of these days, but I’m glad that we picked up more and more advanced manufacturing and now we seem to be picking up ancillary demand which has been really helpful last quarter to relate it to all the data centers that are being built around our markets.
Reid Dunbar
Yeah. Maybe just to add a stat to help quantify some of the numbers of our 685,000 square feet of development leasing that we’ve done year to date. About half of that was related to data center related type users.
Todd Thomas
That’s helpful.
Reid Dunbar
All right, thank you. Sure.
Operator
Your next question comes from Nick Fillman with Baird. Your line is now open.
Nicholas Thillman
Good morning. Maybe just two quick ones. First on Stacey, on that development leasing, the 4 cents, how does that compare to the 7 cents that you in the initial guide? Is it higher? Is it the same number? We should just view that the first quarter leasing $0.03 contribution. And then secondly just on overall development starts and expectations. I know you guys try not be concentrated within individual markets. Are there any guideposts around starts within a market? From a risk parameter standpoint that we should be looking at, we look at some strong leasing in a market per se like Houston.
But just curious on thoughts on distribution of where the starts will be. Thanks.
Staci H. Tyler
Sure. Good morning, Nick. So for our development leasing, you’re right, we initially had $0.07 in our initial guidance for the year. We have taken care of some of that. So some of that, Most of that $0.03 that you referred to in the difference has moved from speculation speculative leasing to signed leases with the work that we’ve done over the last few months. So yes, I would say generally that the $0.073 of that has moved into actual signed leases for development NOI and the remaining $0.04 is speculative leasing.
And again that’s in the second half of the year and really ramps up when we get to fourth quarter
Marshall A. Loeb
And then. Nick, hey, good morning. It’s Marshall on the kind of our development risk. I really like our model and that it is as space gets leased, we’ll build the next phase in the park which usually means a building or two and then within a market like I’ll stick with Houston for example where we’re up by George Bush Airport, but our grand west crossing is out in Katy, So call it 12 o’ clock and 9 o’ clock on the map. You’re so far away, you can be so far away in Dallas or Houston or Atlanta, some of our markets that it allows us to be active developers in different sub markets and not those projects don’t compete with each other for same tenancy.
So thankfully we really don’t. I mean we look at our overall development and kind of low earning assets and how much of that are we willing to feel like is a reasonable amount to take on at any one time. But thankfully on a market by market usually I’ll get the call and the team is running out of space and we’ll have the permit in hand and start the next building as quickly as we can. And you saw that this quarter in a couple of our markets, which knock on wood, I’m happy we were able to raise our guidance, our starts guidance this quarter.
And look, I’d love to keep nudging that along as the year progresses. Last year we took it down, I think rightfully so because we want to be good stewards of our investors capital. But I’m hopeful if the market can continue the pace it’s been on that there’s still upside at least to our starts number and then maybe even in our development revenue number too. We’ll see how late in the year that happens.
Reid Dunbar
Yeah, Nick, I would add just some color on our development leasing to date that’s been in nine different markets and we currently have projects active in 13 different markets. So we have a lot of dots on the map which allow us to continue to shoulder some of the risk throughout the portfolio. So excited to see that the demand has been broad based in the various markets.
Nicholas Thillman
Great. That’s it for me. Thank you all. Welcome.
Operator
Your next question comes from Brendan lynch with Barclays. Your line is now open.
Brendan Lynch
Great Good morning. Thanks for taking the question. Wanted to follow up on the Moody’s upgrade. I’d imagine that comes with certain commitments related to your balance sheet, so maybe you could quantify what your flexibility is to increase leverage and also what your willingness is to do so, and what you’d need to see to be more comfortable operating closer to four or five times like you have in the past.
Staci H. Tyler
Sure, Brendan, yes, you’re right. So we were very pleased with the Moody’s upgrade to Baa1, and we’re pleased to see that we are well within the, you know, the debt parameters that they would have for our balance sheet with that rating. So we have a lot of, a lot of dry powder, so to speak, so we could increase leverage and not be close to risking being out of range for our current rating, which is really good news. And we had actually been tracking at this lower leverage for quite some time. So we were pleased with the rating upgrade and also feel like we’re in a very comfortable position.
The range you mentioned and that 4.5 sub 5 times debt to EBITDA is the range that we would want to keep our balance sheet in. And we have a lot of Runway in terms of raising leverage and we are remaining flexible. So as we watch the equity and debt markets, what the cost of capital is from the various buckets, and we hope to be able to issue both debt and equity. And it’s really more about finding opportunities now. It’s a very good position for us to be with our sector leading balance sheet. So we’re pleased with where we are and also acknowledge that we have a lot of room to increase leverage on a measured basis as we find those opportunities.
So we have our full 675 million available capacity on our credit facility. And then just in terms of the outlook for the year, we have 300 million in capital proceeds in guidance for the year. We issued 70 million on the ATM in first quarter at over 191 per share. And we have another 50 million in forward contracts that are outstanding. So that will. That leaves about 180 million in proceeds that are yet to be sourced for the remainder of the year. We have 140 million in debt maturities later this year.
So we can be flexible with that remaining 180 million and we’ll just keep our eye on the equity and debt markets. But we have plenty of capacity on the balance sheet to increase leverage as we find those opportunities.
Brendan Lynch
Great. Thank you, Stacey.
Staci H. Tyler
Thank you.
Operator
Your next question comes from Alexander Goldfarb with Piper Sandler. Your line is now open.
Alexander Goldfarb
Hey, good morning down there, Marshall. A question on oil, on diesel and gas and all that. Obviously you’ve got tenants who are related to the oil business. You have other tenants that do a lot of trucking and then you have the consumer. But putting it all together, when we see higher diesel prices and the cost on trucking, does that help you because people more want closer facilities that are closer to their customers? Does that hinder you because then the customers are more concerned about shipping costs?
Or is this one of these, like you said, where people just look at their businesses and whatever the cost of transportation is, it is what it is and that doesn’t affect how they think about what rents they’re going to pay you or their business. I’m just trying to understand how diesel fits into all of the conversations that you’re having because it doesn’t sound like tenants are really pulling back. And as you said, you feel better today than you did back in February.
Marshall A. Loeb
Good morning, Alex. I think maybe. Tell me. As I think about it and we discuss it here, the short answer is maybe yes. And I don’t mean that facetiously. I think in the near term people have to run their business like you described and service their customers. And I do worry about just the consumer balance sheet. But that’s why we like being in fast growing markets. We love the steady e commerce growth and even I’ve said we try to be a little bit like retail locations. We want to be in a high disposable income neighborhood as well because there’ll be a lot of goods and services shipped there.
And I think you’re right. The way I viewed it, in the short term you’ve got your leases, you’ve got your logistics network, you’ll operate your business. But longer term, if diesel prices stay higher for longer, I think all these things and being in fast growing cities, they never can keep up the interstate system with the population growth. So what I like the tailwind is I think last mile gets more and more critical to their business. You can afford to pay more in rent because you’re saving it on diesel fuel.
And when you think of your strategy, if you’re delivering packages or repair people or pool supply, whatever it is, you want to be near that end consumer, whether it’s an individual or a business. So I think last mile only becomes more and more critical because the traffic, that’s why we see this gets worse in Atlanta and Phoenix and Las Vegas and Orlando, you name it, in our markets and we have started, you know, years ago we didn’t have. Now we have the same customers in two different parts of the market because the traffic’s terrible in Dallas and I don’t see it.
It’s only going to probably get worse over the next decade than it is today. Nashville, all of them, traffic’s terrible. The brokers were saying if we don’t get in the car now, there’s no point jumping in the car and you go. That’s frustrating to tour the markets, but it’s great for our last mile locations.
Michael Griffin
Thank you.
Marshall A. Loeb
Sure. You’re welcome.
Operator
Your next question comes from Michael Griffin with Evercore. Your line is now open.
Michael Griffin
Great. Thanks. Marshall. I’m curious. Just as it relates to sort of market rents and market rent growth, it seems like you’re more constructive than when we had the call a couple of months ago. But has your outlook for market rent growth change? You know, it seems like there’s still good leasing demand. Maybe some of the dev leasing is taking a little bit longer. But any kind of commentaries there and then, you know, markets may be standing out to the positive versus those might be a little softer.
Thank you.
Marshall A. Loeb
Sure. Good morning. You know, I think I am a little. You’re right. Maybe a little more constructive or optimistic. I’ve been thinking with supply down for a few years, I was probably admittedly too early thinking lack of supply and call it 4% vacant and our product type that it wouldn’t take much growth and demand. We’ve not seen an inflection point in rents there. You know, absent California, still growing inflation, maybe inflation plus a little bit. But we are seeing the pickup in demand. If it continues, then just Econ101, supply, demand, price has to follow.
We’re not seeing it yet, but we’re certainly closer to it. It feels like we’re knock on wood beyond about past the bottom. And things have been improving the last couple of quarters and I hope if we can sustain it eventually we’ll get to that rent growth that I predicted four years ago. Eventually I’ll be right.
Brent W. Wood
In terms of the market strength there, Michael, you had mentioned strength to markets and Reid touched on this. But nine of the 11 leases being in different markets. So it’s been widespread which ran from east coast all the way across to Phoenix. We still see that. Raleigh, Charlotte, Atlanta, Florida, the east side still having good activity and results. In Texas, you still see Dallas and Houston be very strong. Austin the softest pocket there with vibrant market but just a little bit overbuilt.
And then Phoenix has been very resilient. So it’s been broad based, some of the slower end that we still la. It feels like maybe it’s finding some footing. Who knows, you need a few quarters to really show that. But the Bay Area continues to be a bit slow. So the couple of California larger markets continue to be the slower in terms of new activity. But throughout the rest of the portfolio it’s broad based and the leasing has been broad based. The starts have coincided with that have been geographically dispersed.
So the good news is we’re not overly dependent at the moment on a particular market or two to try to continue to pull us along. It’s been a pretty equal shared load which makes, you know, gives you a little more breathing room. It’s nice to have.
Reid Dunbar
Great. Thanks so much.
Brent W. Wood
Sure.
Operator
Your next question comes from Rich Anderson with Kantor Fitzgerald. Your line is now open.
Richard Anderson
Thanks.
Blaine Heck
Good
Richard Anderson
Morning team. So a question on the comment around data center demand, supplier demand, half of the development leasing I think I heard Reid say. But I’m wondering if you can sort of talk about the calculus of that a little bit. Once removed from the direct opportunity, when you think about your primary, you know, business is consumption oriented. You mentioned last mile becomes more critical in this day and age. But to what degree is demand for data center suppliers and manufacturing suppliers informing the opportunity set for a consumption oriented platform like yours?
In other words, does it matter who’s taking the space at the end of the day and does it, you know, does. Does your product become scarcer because somebody else is some other type of user is jumping in and taking space and does that ultimately benefit you from an indirect point of view rather than just a direct point of view from leasing supplier oriented space? Just curious if you can comment on that broader view. Thanks.
Marshall A. Loeb
Sure. Rich, good morning. If I’m following you, I agree in that. But look, I think what we’ve called our traditional or long standing type tenants are there and that’s maybe that consumption, whether it’s business or individual. And I view kind of the new data center or advanced manufacturing just crowding the demand field a little bit. It should make because we struggle so hard to find sites, sites that work and now even harder to get sites that can get the zoning and permitting. That hurdle has gotten much higher post Covid than it was before.
So there’s no greenfield sites. You’ve seen us tear down office buildings, our piers, things like that. I think it’s going to lead to more incremental demand directly and then I’m assuming even if we don’t get that just its investment in our Communities, whether it’s, whether it’s advanced manufacturing, which we’re seeing a lot in Houston and in Phoenix and some of those markets, or data center development, it will have obviously the ripple effects to the economy. So we’ve said even if the Port of Houston is gaining market share, we’re not near the port, but it still helps our portfolio indirectly.
So I think that’s, I’m pleased. We weren’t seeing the data center demand directly, but we’ve started seeing that in the last few quarters and in a more and more material way this quarter. And then I think it will continue to kind of crowd the demand for our space, which should lead to more development and higher rents if we can, you know, keep doing what we’re doing and finding those sites which are harder and harder to come by in these fast growing cities too.
Brent W. Wood
Yeah, I might add on to that, Rich. I think Marshall’s exactly right and I think it’s, you know, one good thing about industrial. It’s rare where you have businesses where new uses come in but don’t really displace or dilute your existing customer base. It really feels similar to whether you want to say six or eight years going back to online fulfillment, how that continues to mature and emerge, but how that was a new use and as Marshall saying, kind of began to squeeze its way into the different uses on the pie chart.
But the interesting thing, it wasn’t displacing really any use and you know, it’s not as though we had a software that come out dated and somebody had a new one and then ours was relegated, you know, irrelevant. So it feels a little bit like this data center support, advanced manufacturing support and things we’re seeing are, as Marc said, crowding the field. And I think it’s a direct benefit. It reminds, you know, has this early stages, feels like, you know, another kind of color that you can add to the pie chart that’s helpful and, and we’re seeing that here early this year for sure.
Blaine Heck
Great. Thank you very much. Welcome.
Operator
Your next question comes from Mike Muller with JPMorgan. Your line is now open.
Michael Mueller
Yeah. Hi. I know you have your 265 million development start guidance for the year, but if you forget that timeframe, just how large is the pool of, I guess, development expansion opportunities that you would think are high probability and that could be, be started in a relatively short time frame? Is it two or three times that? 265?
Marshall A. Loeb
I would. Hey, Mike. Good morning. I don’t know that it’s that large. It’s you know, certainly, you know, probably internally we would think of, we’ve got the 265 and starts we’ll keep internally, this is what we’re starting. And then we’ve got kind of, kind of our gray sheet, which is what could we start this year? And that’s probably equal size or a little bit larger today. And look, if we. If our starts go to 175 million this year, again, I think, I don’t think they will based on where we sit today, but I think that’s what we should do for our investors.
But we could potentially get, you know, add another up to 300 million. I think, depending what you call short term by the end of the year. I don’t think it will. All that will go down that crazy of a year. And we probably have to hire some people to get to there too. But look, we’ll go as fast or as slow as the market allows. And I think that’s kind of where our model one difference we’ll try to explain to people. Most of our peers will go build a big box building on the edge of town. And in my mind, it’s almost like you’re pushing supply out into the market where ours is a pull where it is.
We’ll get a call at corporate saying, I’m running out of space in phase three. And it’s really our own customers and our own prospects pulling it. So right now our Crystal Ball says 265 million. We think we could probably add a few hundred million to that if everything in every market and every sub market fell our way. And we’ll just see how the balance of the year plays out. Yeah, Mike, to add a little more color
Reid Dunbar
To that as we talk about users pulling demand from the market, what that has done for us this year has allowed us to take some of the starts we had projected for second half of the year and accelerate that into the first half of the year. And a good example is what the team in Houston has done with one of our projects at grand west, where we’re always having the next phase TDOT permit ready to go. And then we also add spec office in our spaces. And so we had a prospect that came through. The team signed that lease in March.
We were able to start the next phase also in March, which was previously anticipated to be a second half of the year start. And because of the spec office in place, we commenced that lease in April. So that kind of checked all the boxes, and that’s what the team is always striving to do. And A great example of what we’re trying to do in every market. And assuming the demand is there, we can pull that off hopefully time and time again.
Marshall A. Loeb
I think, Mike, I won’t. Thank you. You’ll ask one question and we’ll give you five answers. But we limit you to one question. I think one differentiation. We talk about that. And Reid, that’s a great example and really good for our team. This is when we say as a public company, by having the land and the construction people and the permits, as things do inflect, our private peers just don’t have the land and the team to carry it through this kind of slowdown that we think Houston, being a great example, will have a really nice head start once the inflection point really takes hold.
And it will take a while for our private peers to really ramp back up. And so we’re patiently have been waiting for that. But I think that’s a really good example of kind of what we have in our mind’s eye of, okay, when the demand there, we’re going to move faster. And I do think at the inflection point, the other place we’ll benefit is I think, you know, big box was what got built in the last cycle in the upturn. And that’s what’s going to pick up first again because that’s where the land’s readily available and that’s where people can put large amounts of capital to work.
So I like that we’ll be a little more insulated than the big box developers.
Michael Mueller
Thank you.
Marshall A. Loeb
Sure. You’re welcome.
Operator
Your next question comes from John Kim with BMO Capital Markets. Your line is now open.
John Kim
Thank you. On your occupancy, it came in stronger than expected this quarter. And you raised guidance, same store guidance for the year, but it still suggests a decline of about 120 basis points from first quarter on average for the remainder of the year. So I’m wondering if you’re expecting no move out or what kind of retention rate we should be modeling for this year.
Staci H. Tyler
Yes. So we build our budgets from the suite by suite basis up. And when we roll all of that up, we are projecting occupancy decline that is no different than what we were anticipating when we initially published guidance for the year. And as you mentioned, we increased the same store occupancy guidance by 10 basis points with this budget revision. As we compare to last year, 2025 began the year lower and occupancy ramped up each quarter as the year progressed. And so we were starting 26 at more of a peak occupancy level with average same store occupancy in first quarter of 97.3%.
So you are correct to get to that year average projection of 96.4. It does assume a decline in occupancy as the year progresses. That is not because we have known move outs that we know we won’t be able to backfill. That’s simply because we’re looking at this. Our teams are on a suite by suite basis and saying what’s the probability that this tenant renews if they move out, what will the downtime be? So that’s really just the accumulation of all of the individual assumptions. The suite by suite basis we typically run in that 75% customer retention.
You know, if we do that and if we have some success leasing, which we believe we will given the current environment, then hopefully we’ll outperform that same store projection. But given all of the macro uncertainty, the tensions in the Middle east is just, just hard to push our leasing assumptions given all of the headlines and everything that’s going on. So this feels like a good baseline for assumptions given what we know at this point or what we knew a few weeks ago when we were putting the budget together.
But I will say thus far, a few weeks into second quarter, we’re feeling very good about where things are and we’re tracking a bit ahead of where we had projected to be at this point.
John Kim
Can you remind us where seasonality plays in? Because I seem to recall that it tends to be stronger. Occupancy tends to be stronger in the back half of the year.
Marshall A. Loeb
You’re correct. Usually. I know one of our peers talks about 1, 2, 3, 4 where you know, occupancy is usually the lowest in builds during the year. And I think that’s reasonably accurate. We would agree. And that it’s certainly fourth quarter is probably what you tipped it. Historically, our best quarter and third quarter’s right there as it builds. So. So we’ll kind of the balloon will let out a little bit of steam as the year starts and then build back up. You’re right in the back half of the year.
Vikram Malhotra
Okay, great. Thank you.
Marshall A. Loeb
You’re welcome.
Operator
Your next question comes from Michael Carroll with RBC Capital Markets. Your line is now open.
Michael Carroll
Yep. Thanks, Rita. I wanted to follow up on your earlier answer regarding development starts. I mean, is it normal for East Group to be able to commence a new project in a market pretty immediately after a lease is signed? And just sticking with your Houston example, it does look like east group signed about 280,000 square feet in the first quarter and broke ground on about 128,000 square feet. Is there an opportunity to start another building in Houston because of that or are you waiting just because of just the broader market uncertainty and you don’t want to have too much starting in that one market at one time?
Reid Dunbar
Great question. And in regards to that Houston activity specifically, I would anticipate that we do start something a little earlier than we had originally underwritten when we started off the year. Part of it was the Houston team needed to take a breath for at least a week or so to keep because they’ve been extremely busy. But it is pretty typical, especially where we sit right now where we want to have all of our projects when we have multiple phases to have the best we can permit in hand and the team has a good idea if a deal is going to make and so they’ll start teeing things up in advance, getting pricing, getting the GCs ready to go, getting the approvals internally ready to go.
And so we always want to keep product coming as demand pulls it out. And and yeah, that is the case pretty much across all of our projects is we want to be able to start, if not the same month as quickly as we can after that lease that was needed to fill the current vacancy or give us the confidence to break ground on that next phase is there. And at times we’ll sign, we’ll get approval, internal approval, which is contingent on a lease being signed. And so that gives the team the flexibility to go even quicker if needed.
Operator
Your next question comes from Vikram Malorda with Mizo. Your line is now open.
Vikram Malhotra
Morning. Thanks for the question. I guess just I want to clarify two things based on all your comments. One, I understand the conservatism, you know the occupancy guide, but do you mind just giving us maybe some of the components like what have you actually baked in for new leasing and maybe additional in service development lease up to kind of hit that occupancy just seems fairly conservative. I would have expected that number to be higher. And then second, just if you can clarify based on all the comments, whether it’s the data center’s eye, you’re feeling better about the economy, environment, etc.
Where can escoup be more opportunistic? Is it time to buy in SoCal perhaps do more spec to take advantage of the data center side? Where can you be most opportunistic? Thanks.
Staci H. Tyler
In terms of the occupancy guide, Vikram, I hope you’re Right. I hope this does prove to be conservative. We, you know, again we’re looking at every lease that’s maturing this year and making an assumption on whether that tenant will renew. And we our teams typically under promise and over deliver. So we hope that that’s what, what they’re going to do this year. When we look at tenant retention, first quarter was higher in the 83% range. So if that were to continue in the rest of the year, then I think we would outperform our occupancy guide.
We did not assume that level of revenue renewal when we were, you know, we’re rolling up this revision to the budget. So I hope that you’re right. We do, but we do have new and renewal leasing assumptions built in. We’re not, we don’t have a headwind from significant move outs that we’re aware of. This is really just the natural role of our portfolio. As the year progresses and every quarter that goes by, every month that goes by, we should be you know, signing leases and hopefully the occupancy guide is a floor.
And again thus far in April, we’re, you know, outperforming what our projections were. So hopefully that that continues.
Brent W. Wood
Just one comment that I would add to that is that we do have one lease attended in Tampa, 222,000ft. That right around the end of turn of second quarter into third quarter that we know is going to vacate such a little bit of it. But I would also say as we Reid alluded to earlier, the 775,000 square foot feet of first gen space where previously developed property that’s converted into the portfolio, that’s a little trickier for the field to budget from a leasing perspective because where you have existing tenants, as Stacey saying, you can say, hey, you’ve got a 75, 80% renewal probability, you’ve got a good chance to keep the tenant.
It takes a little bit of the risk out of your leasing assumption. But in that 775,000ft, you go from not having a prospect to having a prospect and leasing the space. And that can be more inconsistent and choppy in terms of the pace at which that goes. And so when we look at some internal occupancy numbers, excluding those, the impact of those figures, then the number is probably vicar more along the lines of what you would anticipate. So I think that adds some volatility to it.
Marshall A. Loeb
Agree, Brent. And I think in terms of opportunity, you know, I think as we lean in and things pick up, certainly the 770,000 square feet that’s been delivered. The good news is we’ve maintained our development yields even though it may have taken us a few extra months to get there. But certainly to me where we have upside is maybe a little bit, which I like. Maybe it’s two or three buckets. It’s maybe our occupancy is a little bit better than we forecast. We averaged 98% for a couple of years, which were company records.
We knew it would drift down ultimately, but I’d love to think we’re on more of an upswing there, filling up some of the development leasing. And then as that happens we’ll certainly ramp developments back up. We’ve been as high as 400 million. I’m optimistic that we’ve got a. We’re better positioned than a number of our private peers, as I mentioned, to maybe be moving on a lot of developments before they can catch up. And we all overbuild again in the next cycle and then kind of the third leg I think you’ll see us, we’re starting to think about a little bit.
When the market was good early on we were able to build our own buildings. But a lot of times there was a project around the corner that had some vacancy and we felt like because of the development demand, new leasing we were seeing to buy vacant buildings again not changing the quality of what we built. It was better higher yields than in a core acquisition because we were taking the leasing on but not the construction risk. And you’ll probably see us if things continue maybe at least starting to think about those in certain markets of we haven’t done a value add project in a few years but if development demand picks up, I think that window will be open for a moment in time and then everybody will outbid us again on value adds and we stop using that.
But it’s a cycle and so we’re going to end up with well located shallow bay last mile buildings. And sometimes we buy them leased, we’ll build them most of the time and sometimes buying them vacant. And I think we’re turning the cycle where buying them vacant. That opportunity set may reopen a little bit. I hope so. And that’s kind of a shadow development pipeline. It’s a way for us to increase our development pipeline or really the value creation in an upmarket. But we where we’ve had a longer period of time leasing our own development.
We haven’t wanted to buy someone else’s vacancy either. But it feels like that may be hopefully starting to shift.
Operator
Your next question comes from Ronald Camden with Morgan Stanley. Your line is now open.
Ronald Kamdem
Hey, just quick ones, just there’s a. I saw the, just on the development side again, the under construction, so forth. I see the cap rate expectations are up. Call it 10, 20 basis points and I don’t know if that’s mixed or anything like that, but maybe can you just talk about just how cap rates are trending on the development side and if you can just compare that to sort of acquisitions and what you’re seeing in the market, that’d be helpful.
Reid Dunbar
Yeah. So on the development yields, Rania, thank you for pointing that out. We have seen a steady uptick in the development yields within our pipeline. Just as a reminder, Dominguez, that’s a redevelopment and that accounts for about 50bps of the development yields that we’re seeing. But we have seen a steady increase really starting from Q1 to 25 where we sit here today. So that is a positive. And then on cap rates, it is still a very varied market from market to market to sub market and type of product.
Product. But in some submarines or some markets we’re seeing sub 5 cap rates for good quality, well located assets. Other markets are kind of that low 5 to maybe mid 5 in cap rates. We have been surprised with the downward pressure in cap rates. The deals that we’ve chased here year to date have been more competitive and unfortunately we’ve been bridesmaids on a couple of them. So there is a lot more competition, it feels like this year than what we saw last year. And that potentially pushes cap rates down, maybe even a nudge further as the year goes on.
Ronald Kamdem
Helpful. And I guess I just wanted to follow up on the data center leasing comments. I think you talked about half of the development leasing was I guess data center related. I guess I was just curious in terms of, from your perspective, can you talk about sort of rate of change? Right? Like is this something that, you know, your view is that this is going to continue to accelerate. Is this incidental, is this stable? Just any sort of commentary on that would be helpful.
Marshall A. Loeb
Hey Ron, good morning. You know, I think you know, at least what we
Brendan Lynch
Read
Marshall A. Loeb
And hear, the amount of capital going into data center development is, you know, assuming they can get their permits is, you know, amazingly incredibly high dollar volume and doesn’t seem to be slowing down anytime at all. So I think it’s here to stay. Will it be 50% of our new leasing? Probably not and I guess I hope not. I hope we stay really diversified on that front. But it’s, it sure doesn’t Seem like the data center capital spend from name it, Meta or whatever companies are out there, data centers is slowing down.
So I think it’s a new source of demand, much like E Commerce was several years ago and we’ll end up again. We won’t be a data center developer, but it’ll be somebody delivering something to a data center or somehow that’s their customer like we’re seeing. So I’m excited to see that new source of demand and it can pick up our portfolio, pick up our development leasing, face all the things like that and it’s probably come on faster than we would have. Maybe I won’t speak for the team than I anticipated
Reid Dunbar
And I would add to that Ron, the users that we saw sign leases this year to date, it was a mix between users that are probably more focused on the data center construction piece, but then also a mix of users that are data center servicing piece. So I would imagine some of it may be determined on how quickly or how much more construction continues, but definitely some of it feels like it’s sustained in the fact that you are going to continue to have to service these data centers and we are seeing users that take our space that need to do that.
Ronald Kamdem
Helpful. Thanks so much. You’re welcome.
Operator
Your next question comes from Jessica Zhang with Green Street. Your line is now open.
Jessica Zheng
Hi, good morning. Could you help clarify what drove the higher same store owner growth in the first quarter relative to what’s projected for the rest of the year? Is it mostly occupancy driven that you talked about?
Staci H. Tyler
Yes, yes, it’s mostly occupancy driven. So first quarter same store occupancy this year was 97.3% in first quarter and that that compares to a same store quarter of 96%. We had 130 basis point increase in occupancy which really helped drive that 9.2% same property growth. And again as I mentioned earlier, the comps every quarter that progresses this year become harder because in 2025 our occupancy was increasing steadily throughout the year. So that’s why we’re not projecting 9% same store growth for the year.
But. But yes, occupancy definitely drove the majority of the first quarter 9.2% same store growth.
Jessica Zheng
Okay, great. And then just a quick follow up on the 770,000 square feet First Gen Development Leasing opportunity that’s still available. Just wondering, will all of that be in the 2027 same store pool or are some of it in this year’s same store pool as well?
Staci H. Tyler
Yes, the 775,000 of first generation development leasing opportunity. All of those projects transferred in 2025. So those will be in the 27 same store pool because they will have been in the portfolio for all of 26 and all of 27.
Jessica Zheng
Okay, great. That’s very helpful. Thank you.
Staci H. Tyler
Sure. Thank you.
Operator
Your next question comes from Alexander Goldfarb with Piper Sandler. Your line is now open.
Alexander Goldfarb
Thank you for taking the follow up. Stacy, just a quick question on the guidance looking at second quarter, your range is a bit below where the street is, but you raised the overall full year range. So sounds like there’s more of an acceleration in the back half than maybe we in the street are modeling. Is that from this speculative lease up, is that what’s driving it or. Or what’s driving the sort of implied acceleration ramp in the back half? Just trying to understand how much is sort of locked in versus how much is dependent on Brent and Reed and everyone performing.
Staci H. Tyler
Yes. So there’s several building blocks, really. It’s not just one answer. So definitely the impact of speculative development leasing. Again, we have no impact in second quarter projected. So all of those that would be coming in in third quarter and then at a higher rate in fourth quarter. And same with some of our leasing projections. If we do have spaces rolling second and third quarter, those are projected to be leasing up by the end of the year. So I would think about it as truly stair steps.
So from first quarter to second, third and fourth, continuing to ramp as the year progresses. I will note that our G and expenses are projected to be higher in second quarter than in third and fourth quarter. And some of that is due to the timing and some items related to our management transitions this year. There are still some moving pieces with relocations, new hires starting. So second quarter is going to be about a penny more in G and A expense than in third and fourth quarters. So that tempers the growth a little bit in second quarter.
But. But we’re still projecting 6% FFO growth in second quarter over second quarter 25. So still a very, very strong projection for second quarter, but that does ramp up a bit more as third and fourth quarter progress.
Alexander Goldfarb
Okay. And just I know you’re not given 27 guidance, but still given the pace of this ramp that you’re talking about and assuming the world doesn’t come to an end, it would seem like 27 is a better number than where we are now or there are things that we should think about that would offset that.
Brent W. Wood
We hope that earnings for 27 is better than 26? Yes. No, no. But
Alexander Goldfarb
Better than where we in the street are thinking based on what you’re talking about here and if it comes through on your speculative leasing that you’re talking about.
Staci H. Tyler
Yeah, I think it’s too early for us to comment on 27, but we do have a lot of opportunity. When we think about the 25 development projects that transferred into the portfolio, that’s 775,000 of opportunity leasing, we’ll call it. That we can do. And then the current development pipeline with starts, I mean, 27 could certainly be a very strong year, but I feel like there’s too much time between now and there to comment on it at this point.
Alexander Goldfarb
Okay, thank you.
Staci H. Tyler
Thank you.
Operator
Ladies and gentlemen. As a reminder, should you have a question, please press star one. Your next question comes from AJ Peak with KeyBank. Your line is now open.
Unidentified Participant
Your line is open. Aj peak.
Marshall A. Loeb
Operator. Thank you. We may have lost AJ. I certainly appreciate everybody’s time and interest in EECroup. We’re available post call if we didn’t get to your question. And we’ll hopefully see you at a couple upcoming conferences. And again, appreciate your time this morning. Take care. Thank you.
Operator
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line lines.