STAG Industrial, Inc Q4 2025 Earnings Call Transcript

STAG Industrial, Inc (NYSE: STAG) Q4 2025 Earnings Call dated Feb. 12, 2026

Presentation

Operator

Greetings and welcome to the STA Industrial and fourth quarter 2025 earnings conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Xiarhos , Vice President, Investor Relations. Thank you sir. You may begin.

Steve Xiarhos — Vice President, Investor Relations. .

Thank you. Welcome to Stag Industrial’s conference call covering the fourth quarter 2025 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company’s website@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 or ffo, Same Store noi, GNA acquisition and disposition volumes, retention rates and other guidance, leasing prospects, rent collections, industry and economic trends, and other matters.

I 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 Croker, our Chief Executive Officer, and Matt Spenard, 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 the areas of focus.

I’ll now turn the call over to Bill.

William R. Crooker — President, Chief Executive Officer, and Director

Thank you Steve Good morning everybody and welcome to the fourth quarter earnings call for Stag Industrial. We are pleased to have you join us and look forward to discussing the fourth quarter and full year 2025 results. We will also provide our initial 2026 guidance. As I look back on 2025, it was arguably one of our more successful years. We outperformed almost all of our budgeted metrics including occupancy, credit loss, leasing spreads, Same Store Cash NOI development starts and core FFO. We grew same store cash NOI by 4.3% and grew core FFO per share by 6.3%.

This growth was supported by an improved industrial supply backdrop, with deliveries down almost 35% versus 2024. Most of the markets we operate in remain healthy from both a supply and demand standpoint, with positive rent growth across almost all of our markets. While many business leaders remain cautiously optimistic, we are seeing increased tenant activity across our markets. Economic growth has begun to improve and meaningful investment has followed. We expect 180 million square feet of deliveries or less this year, much of which will be driven by build to suit transactions. We anticipate that net absorption will improve in 2026, contributing to another year of positive rent growth across our markets.

We expect national vacancy rates to peak in the first half of this year, with an inflection point in the back half of 2026. 2025 was a high watermark for leasing volume for STAG. We expect 2026 to follow suit, driven by a record amount of square footage expiring in a calendar year for our company. I am pleased to report that we have addressed 69% of the operating portfolio square feet we expect to lease in 2026. We project cash leasing spreads of 18 to 20% for 2026. This leasing success is a testament to the quality of our portfolio and a welcome sign of tenant engagement and commitment to their space.

Q4 was the most active transaction quarter of 2025. This was due in part to less macro volatility which brought sellers to the market in the second half of the year. Acquisition volume for the fourth quarter totaled $285.9 million. This consisted of seven buildings with cash and straight line cap rates of 6.4% 7% respectively. These buildings are 97% leased to strong credits with weighted average rental escalators of 3.5%. Subsequent to quarter end, we acquired one building for $80.6 million with a 6.1% cash cap rate. This is a Class A building leased to a Strong credit for 12 years.

In terms of our development platform, we have 3.5 million square feet of development activity or recent completions across 14 buildings. As of the end of Q4, 59% of 3.5 million square feet are completed developments. These completed developments are 73% leased as of December 31st. In the fourth quarter we commenced a new development that was identified within our existing portfolio by our operations team. The 186,000 square foot project is located southwest of Kansas city in Lenexa, Kansas. The project has an estimated delivery date of Q1 2027. The building will have the flexibility to demise into suites of 60,000 square feet or less in a market with healthy fundamentals.

We are projecting a cash yield of 7.2% on this project. Subsequent to quarter end, we executed a 78,000 square foot lease in one of our Charlotte development projects to a manufacturing and assembly company. The building is now 39% leased. We initially underwrote fully stabilizing the building in the first quarter of 2027. Before I turn it over to Mats, I am pleased to say that after year end we we raised our dividend 4% which is the largest raise we have had since 2014. This raised result of many years of reducing our payout ratio and retaining as much free cash flow as possible.

In addition to raising our dividend, we have modified the dividend payment cadence from monthly to quarterly. Going forward with that, I will turn it over to MATS who will cover our remaining results and guidance for 2026.

Matts S. Pinard — Executive Vice President, Chief Financial Officer and Treasurer

Thank you Bill Good morning everyone. Core FFO per share was $0.66 for the quarter and $2.55 for the year, representing an increase of 6.3% as compared to 2024. Included in Core 4 for the quarter are two one time items that contributed approximately one penny to Core 4 per share. During the quarter we commenced 31 leases totaling 3 million square feet which generated cash and straight line leasing spreads of 16.3% and 27.4% respectively. This leasing activity included five fixed rate renewal options totaling 882,000 square feet, most of any quarter in 2025. Excluding these five fixed rate leases, fourth quarter cash leasing spreads would have been 0.2%, an increase of 570 basis points.

For the year, we achieved cash and straight line leasing spreads of 24% and 38.2% respectively. Same store cash NOI growth was 5.4% for the quarter and 4.3% for the year. We incurred 22 basis points of cash credit loss in 2025. Retention was 75.8% for the quarter and 77.2% for the year. As mentioned by Bill, we’ve accomplished 69% of the square feet we currently expect to lease in 2026, achieving 20% cash leasing spreads. Moving to capital market activity on December 8th, the company settled $157.4 million of proceeds related to forward ATM sales that occurred throughout 2025.

Net debt to annualized run rate adjusted EBITDA was 5.0 times at year end with liquidity of $750 million. 2026 guidance can be found on page 20 of our supplemental package which is available in the Investor Relations section of our website. Same Store Cash NOI growth is expected to range between 2.75% and 3.25%. The components of our Same Store Cash NOI guidance include the following Retention to range between 70 and 80% cash leasing spreads of 18 to 20%. Average same store occupancy for 2026 is expected to be between 96 and 97% and consistent with previous years.

50 basis points of credit loss is included in our initial Cash Same Store Guidance acquisition Volume guidance is a range of $350 to $650 million with a cash capitalization rate between 6.25% and 6.75%. Acquisition timing will be more heavily weighted to the back end of the year. Disposition volume guidance is between 100 and 200 million dollars. G&A is expected to be between 53 dollars and 56 million dollars. Finally, the increase in interest expense from our recent refinancing of our $300 million term loan G will be a 3 cent headwind to core FFO per share growth in 2026.

Incorporating these components, we are initiating a core FFO per share range between $2.60 and $2.64 per share. I will now turn it back over to Bill.

William R. Crooker — President, Chief Executive Officer, and Director

Thank you Mats and thank you to our team for their continued hard work and outperformance of our 2025 goals. We are excited about the opportunities that are in front of us here at STAG and we look forward to building off this momentum in 2026. We will now turn it back to the operator for questions.

Question & Answers

Operator

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press submission one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press Star two. If you would 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. We ask that analysts limit themselves to one question and a follow up so that other analysts have an opportunity to do so as well.

One moment please. While we poll for questions, Our first question comes from Craig Mailman with the City. Please proceed with your question.

Craig Mailman — Analyst, The City

Hey good morning. Just kind of curious on the leasing front, you know. I know Bill, you said you guys aren’t expecting vacancy nationally to peak until middle of the year, but just from commentary from peers and brokers, it feels like the leasing environment and velocity is picking up. So I’m just kind of curious as you guys kind of contemplated the 100 basis points of occupancy decline, which I understand you guys have 20 million square feet rolling and so you know, 25% of that non renewal is a fairly large amount. But I’m just kind of curious how you guys thought about the pace of backfill activity in guidance and kind of what could be the upside to that if the momentum that we’re seeing coming out of 25 kind of hold and sustainable and maybe even picks up a bit.

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, thanks, Craig. We had a really successful year in 2025 with leasing and exceeded, as I mentioned, most if not all of our budgeted metrics, including our leasing volume. Certainly if that continues, you know there’s. We could lease product earlier in the year and that would be upside. And the way we look at and prepare our budgets and we entered the year in 2026 at close to 98% occupancy rate. And so when you have 20 million square feet rolling at our historical retentions, you’ve got a fair number of square feet that’s going vacant in our budgets and contemplated a 9 to 12 month lease up period for those assets.

There is a number of examples where we outperformed that in 2025. Just one example. For example, we leased an asset in Savannah, Georgia in 25. It went vacant in the first quarter. We anticipated releasing that in 1Q26. We found a tenant released that asset with no downtime, that was in a market that at the time had 10% vacancy rates. So some other options for the tenants ultimately decided to go with our building. And that’s something when we budget, we’re going to budget that I think prudently to lease up in nine to 12 months. But our outcome was zero downtime.

There’s several other examples I could give you on that that happened in 25. Those scenarios could pan out in 26. But the way we budget, we try to be prudent and we certainly don’t budget zero downtime for our assets. But there’s those things happen some years and certainly happened a lot in 25 and we hope it continues in 26. And then just going back to our view on the overall industrial market, I mean it’s still pretty strong, right? I mean we have to chew through some of this supply. We think that happens, you know, peaks, you know, midway through 26 and it starts to really improve as you move through the back half of 26 and into 27.

So overall, you know, really happy with the way 2025 played out, really happy with the results you’re coming into the year with some really high occupancy, some great trends. We hope it continues as we move through 26, but we try to be, you know, prudent when we budget for 26.

Craig Mailman — Analyst, The City

That’S helpful. Then just on the acquisition front, you know, you guys are came out of the gates with 81 million, but you know, Matt’s had mentioned it’s more heavily weighted to the back end. Could you just talk a little bit more about what you have visibility on today and kind of anticipated timing versus what is speculative in the, in the guidance for acquisitions?

Matts S. Pinard — Executive Vice President, Chief Financial Officer and Treasurer

Yeah, I mean, right now all we’ve disclosed is the 81 million. We typically don’t disclose any LOI acquisitions or under contract acquisitions. Things do fall out of loi. They do fall out of contract. We have been underwriting more deals, frankly, this first quarter than we did last first quarter. The momentum from Q4 has continued into the first quarter. A typical transaction year, though, is usually slower in the first quarter and then it starts to build as you move through the year. So we do expect the first quarter to be slower, but we’re underwriting more transactions now than we did in the first quarter of 2025.

Our pipeline is strong. It stands at 3.6 billion. You know, Mike can certainly dive into the details of that if you’d like. But overall, the transaction market is really healthy. We’re seeing some portfolios come to the market. It seems to be pretty healthy. There’s, you can call it, pent up seller demand that came to the market at the back half of 2025, and that has continued as we moved into 2026.

Craig Mailman — Analyst, The City

Great, thank you.

William R. Crooker — President, Chief Executive Officer, and Director

Thanks, Craig.

Operator

Our next question comes from Michael Griffin with Evercore isi. Please proceed with your question.

Michael Griffin — Analyst, Evercore Isi

Great, thanks, Bill. I appreciated the comments in your prepared remarks around sort of increased tenant activity. I was wondering if you could unpack that a little bit. Are these customers, potential tenants you’ve been monitoring that are looking around for a deal or are they really, I guess, closer to signing on the dotted line? And have you seen maybe more newer prospects come into the market that might have been holding off last year?

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, that’s a good question. Interesting question. Beginning of last year, certainly after quote, unquote, Liberation Day, there was tenants hanging around the hoop looking into space, but it didn’t feel like real demand. This tenant activity is real demand. We’re seeing, you know, tenants make decisions, lease space. We obviously had a lot of successes in 2025. I’d say the demand’s pretty broad based. We’re seeing it from 3 PL. We’re seeing it from food and beverage. I would say something that’s a little newer, a little more nuanced is we’re seeing a fair bit of demand from data center tenants.

So those are tenants that are either supplying generators to data centers or even some light manufacturing of data centers, storing other things for data centers, data center developments. We looked at our portfolio. We’ve got 3 million square feet leased to data center tenants. And these are five plus year leases to good credits. In addition, we’ve got some prospects at some of our buildings for data center demand. So that’s a newer demand. But with respect to overall tenant demand, it feels real. It doesn’t feel like they’re just kicking tires. These are tenants that need space and are looking for space.

You know, I think the, the caveat to all that is there’s, you know, there’s some supply that we need to chew through. So these tenants have options. Our portfolio, I say this a lot is, you know, we buy buildings, we add buildings to our portfolio. We make sure those buildings fit the sub markets that they operate in and fit them well. And because of that we all, we have historically and continue to maintain occupancy levels well above market occupancy levels. We expect that to continue. You know, we have been fortunate in 2025 to, to win deals when there were other options that tenants could have gone to.

But we proved to be a very good landlord and we proved to have very good product in our respective submarkets. So we hope that continues. And you know, we just need to get through some of the supply. But the demand out there is real and we expect absorption to increase as we move through the year.

Michael Griffin — Analyst, Evercore Isi

Great, that’s certainly some helpful context. And then maybe just going back to sort of the outlook for supply, maybe to unpack that a little bit more. I mean, look, it seems like if trends are improving into 2026, if you expect vacancies to decline in the back half of the year, if others in the industry are seeing this as well, I guess, is there a worry that we could see a ramp back up in supply if the fundamental picture continues improve, or are there more governors or barriers to entry, whether it’s elevated development costs that might preclude a overbuilding problem that we might have had a couple of years ago?

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, I think the developers in industrial are generally prudent. We had a little bit of excess supply there, but I think really the story there was just a fall off in demand. So I think the Supply was okay. It was just the fall off in demand. And as that picks back up and you start to look at your crystal ball and underwrite more market rent growth, more developments pencil out. But I think those developments, if you’ve got a piece of land and you need a permit and title it and then build it, you’re looking well into 27 before any of these things come online.

Right. So there’s a window here where it’s going to flip and when it starts to flip, I think it’s going to flip pretty quickly in the landlord’s favor here. So with respect to new supply coming online and being a concern, I’m not concerned about our team’s not concerned about it. And if that supply comes back on, it’s going to come back on, I think prudently and I think middle to late 27 or even later than that.

Michael Griffin — Analyst, Evercore Isi

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

William R. Crooker — President, Chief Executive Officer, and Director

Thank you.

Operator

Our next question comes from Nick Thillman with Baird. Please proceed with your question.

Nicholas Thillman

Hey, good morning Bill. Just want to make sure you and Matt are on talking turns after Sunday, but he can move on to some other things. Just overall on understand there’s a new organic growth story with Stag and you had mentioned in our prior conversations looking to maybe even improve on that growth rate by potentially looking to do some more strategic exits of individual markets that might cause some like nearer term dilution but enhance the longer term growth rate, I guess. Has there been any changes in that conversation or any recent developments on the thought process there and is any of that baked into some of the disposition guidance that is included in 2026?

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, I would say it’s not a material shift to what we’ve been executing on the past five years. Right. There’s every year there’s some non core assets we dispose of and every year there’s some opportunistic dispositions. Generally we can, you know, we have a sense of the non core dispositions to start the year. We don’t really have a sense of the opportunistic because oftentimes those are reverse inquiries that come in. We had 2 of those in 2025, 2 assets. One was in the first quarter, one was in the fourth quarter where there were assets that went vacant.

And we love the leasing prospects and we were planning on holding those assets and leasing them up and we sold both those assets at what a market rate would be, market cap rate would be, market rent would be and those were sold at a 4, 9 cap rate. So just great execution from the team. But users wanted the space and they didn’t want to lease it. So great execution. So we anticipate having some, hopefully having some of those this year. But right now the plan is what’s in our guide is just some non core dispositions but nothing in excess of past years.

I think reflecting back on our conversation, Nick, that’s just when you look at the map of Stag’s portfolio, there might be one asset in a market and if we don’t feel like we can grow into that market over time, that’s an asset that we’ll opportunistically dispose of just to be a little bit more efficient on the operating side. But that’s on the margin and not really that impactful to the numbers.

Nicholas Thillman

Oh, very helpful. And then maybe just appetite to hold land on the balance sheet for development opportunities. Understanding that that’s a growing part of the business and most of your development opportunities have been with JV Partners. But just appetite on growing the land bank.

Matts S. Pinard — Executive Vice President, Chief Financial Officer and Treasurer

Yeah, certainly not part of our 2026 plan. Something that’s part of our long term development plan. We’re going to step our way into that right now. We’ve got a fair amount of developments. I’m very happy with how the development initiative has progressed, the results we’re seeing. It’s great to see that lease get signed in our Concord development. There’s some good opportunities that we’re looking at now with some other potential leasing on the development side. And with respect to newer development opportunities, hopefully there’s some things we can announce in the near future on that. And then you know, when you start to think about longer term view of markets, you know, the land is not in our plan.

As I mentioned, holding land right now is not in our plan for 26, but and we are looking, it’s early days but looking into some phase developments that may be an opportunity for us to have a call a quasi land position. But we’re looking at a lot of those things as we grow this platform.

Nicholas Thillman

Very helpful, thank you.

William R. Crooker — President, Chief Executive Officer, and Director

Thank you.

Operator

Our next question comes from Blaine Heck with Wells Fargo. Please proceed with your questions.

Blaine Heck — Analyst, Wells Fargo

Great, thanks. Good morning. Can you just talk about how you’re thinking about your overall cost of capital today and the spread between your cost of debt, or maybe more importantly cost of equity and your required returns on investment.

Matts S. Pinard — Executive Vice President, Chief Financial Officer and Treasurer

Yeah, good morning Blaine, this is Matt. So cost of debt is pretty easy. You know, if we were to go to the private placement market where we historically have been in a short spreads are anywhere between 140 and 150 basis points over. If we go to the public bond market, which we have been evaluating and have discussed on these calls, after our inaugural issuance, we would likely, we’ve been told, receive a 25 to 30 basis point pricing benefit. So if we think about today in the market in which we are currently operating in, it’s called 5 and a half to 575 depending on tenor cost equity, you can do that many different ways from an implied cap rate basis.

Using one of our sell side analysts rubrics. You know, we’re in the low sixes, but what is important is we are retaining, and Bill mentioned this in prepared remarks, we’re retaining north of $100 million. Of cash flows after dividend as well. So to put it a different way, to kind of go through the funding for 26, if you look at the net acquisitions of 350 million, and that’s obviously gross acquisitions, less dispositions. Factor in the $100 million plus of retained earnings, we have the ability to operate this business plan without accessing the equity capital markets. Our leverage would be right in the midpoint of our range. Right now we’re at five times levered. We operate this business plan for 26. At the midpoints, we’d be at 5.25 leverage.

Blaine Heck — Analyst, Wells Fargo

Great, that’s helpful. Color. Matt, second question. You know, you guys commented on the fixed rate renewals weighing on spreads during the fourth quarter. Can you just tell us what percentage of your leases have those fixed rate renewals incorporated in their terms and whether there are any chunky ones that we should be aware of in the coming quarters?

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, it’s single digits usually. We don’t even call that outplaying. We just called it out in the fourth quarter because it looked like spreads were moderating in Q4, but it was really due to that. So every year there’s a few fixed renewal options, a handful, and they’re just spread out throughout the year. So it’s just part of our, our leasing plan. But because it was concentrated in the fourth quarter, that’s why we called it out. So, you know, it’s single digits and they’re, they’re laddered. But the good thing is as you get through these, you work these off.

It’s not like they’re, there’s, you know, unlimited fixed renewal options. Generally there’s one and then you get through it and then you’re, you’re just pushing out the mark to market opportunity.

Blaine Heck — Analyst, Wells Fargo

Got it. Thanks, Bill.

William R. Crooker — President, Chief Executive Officer, and Director

Thanks.

Operator

Our next question comes from Vince Tabone with Green Street. Please proceed with Your question and good morning.

Vince Tibone — Analyst, Green Street

How should we think about potential development starts in 26 and kind of what is your appetite to start new spec projects this year? Is it dependent on leasing current projects or just on a deal by deal basis? Curious how you’re, you’re thinking about that and the amount, you know, that’s maybe reasonable this year.

William R. Crooker — President, Chief Executive Officer, and Director

Yeah. Hey, Vince, I mean given where our development portfolio sits today, we’re very eager to start some new spec projects. Right. Especially given our outlook on the industrial market in the back half of 26 and into 27. Right. It’s just we view it as a great time to start some projects. So for us it’s just whether we can source some more. We think we can. You know, this year we’re a little over 100 million of kind of new projects sourced. You know, I think that’s our, that’s, that is what we have planned for this year.

Hopefully we can, we can exceed that. Now. That’s not going to come in day one. Right. It’s going to come in throughout the year. But it’s something that is, you know, it’s an initiative that, you know, I feel strongly that we continue to build on. The team feels strong. We can continue to build on it and we think it’s something that we will be able to build on. But with respect to starting a new spec project today, very happy to do that. Assuming the returns pencil up.

Vince Tibone — Analyst, Green Street

No, makes sense. Helpful, helpful color. Maybe just switching gears. Can you talk a little bit broadly about kind of the concession environment in your markets, particularly free rent? Do you feel that free rent levels or tis have really stabilized across the market among private players with some more vacancy potentially? Some of your peers have called that out as a headwind to near term growth. It doesn’t look like that’s an issue for your same store guys. Just love to hear color on free rent trends and concessions in your market.

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, we think they’re very stable. They’ve been stable really since beginning at 25. But there are instances in markets in our markets where you’ll have a private landlord. I don’t see it really with the public peers. But you have a private landlord that has been sitting on an asset and just saying, you know what, I’m going to buy this deal and I’m going to give them whatever they need and I’m going to give them a bunch of free rent. But that isn’t market. Right. I mean if you’ve got five buildings that are competing against one another and one’s willing to just, you know, give a ton of free rent and concessions.

The other four are not. So generally what we’re seeing in a market that has vacancy rates, you know, 5 to 10%, you’re seeing a half a month of free rent per year right now. But that’s been stable since 25. With respect to TI’s, we haven’t seen a material change in TI’s. What you do see sometimes is, okay, a tenant wanting additional dock doors. If there isn’t, you know, maybe LED lighting. Generally our buildings have that, but if there isn’t something like that, where it’s more of a building upgrade, they may ask for that. In those situations, you’re seeing landlords in the market, and we would be willing to do it, too, to put that capital into building.

But that’s. I don’t view that as much a ti. It is like putting capital in your building, making your building more marketable and frankly, more valuable. Much different than a tenant specific ti. So I haven’t seen a big uptick in tenant specific TI packages, which are. Which is what we really view as concessions.

Vince Tibone — Analyst, Green Street

Great. Thank you.

William R. Crooker — President, Chief Executive Officer, and Director

Thank you.

Operator

Our next question comes from Mike Mueller with JP Morgan. Please proceed with your question.

Mike Mueller — Analyst, JP Morgan

Yeah, hi. Just a quick one. What’s into your 26 guide for development reasons?

William R. Crooker — President, Chief Executive Officer, and Director

Sorry, I missed that, Mike. What was that again?

Mike Mueller — Analyst, JP Morgan

Yeah, sorry, what’s baked into your 26 guide for development?

Steven Kimball — Executive VP & COO

Yeah, hey, Mike, it’s Steve Kimble here. We’ve got it for 957,000 square feet of leasing, and we’ve. One of those is a build to suit that’s in those numbers. We and Bill mentioned the Charlotte lease that was done after the quarter. So we’d have. After those two, we’d be left with 530,000 square feet of leasing, or about a half million square feet of leasing that we have projected to do in 2026.

Mike Mueller — Analyst, JP Morgan

Got it. Thanks. You’re welcome. Thanks, Mike.

Operator

Our next question comes from Brendan lynch with Barclays. Please proceed with your question.

Brendan lynch — Analyst, Barclays

Great. Thanks for taking my questions, Bill. Maybe you could just walk through your markets and highlight which ones are particularly strong right now and which ones are lagging.

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, so we’re seeing some really good demand in the Midwest markets. I mean, similar to the last couple quarters. Minneapolis remains strong, Chicago, Milwaukee. But what we’ve seen, really in the past, I would say, four months, is an increase in demand in some of the big bulk Midwest distribution markets. Indianapolis being one of them. Louisville is really strong. Columbus has strengthened with a lot of bulk distribution leases getting done there. Southeast has been pretty Strong, I would say on the other side of it, where we’re seeing a little bit more weakness, it’s some of the Southeast port markets, frankly, it’s Jacksonville, Savannah, Charleston, seeing some weakness there.

But then when you think about going down, continuing down, you go around to Texas. Houston’s really strong. Dallas is really strong. So overall, some good fundamentals, but seeing some weakness in those Southeast port markets.

Brendan lynch — Analyst, Barclays

Okay, great, thanks. That’s helpful. I believe you suggested in the past that market rent growth would be kind of 0 to 2% throughout 2026. With that context in mind, those markets that are particularly strong, how much are we seeing those stronger markets deviate from that 0 to 2% average?

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, I don’t have all the numbers right in front of me, but I would say generally it’s a pretty tight band because you still have some vacancy in those markets. So you’re getting a couple 3% market rent growth in some of those stronger markets. But like for example, in India or Columbus, that has really strengthened lately. I don’t think you’re seeing a 3% rent growth there. But in Minneapolis and Milwaukee and Chicago, you might be seeing it there. And then on the other side, it’s closer to that zero to 1%.

Brendan lynch — Analyst, Barclays

Okay, so it’s the demand that you’re pretty tight. It’s mostly coming through as absorption rather than pushing rents more aggressively.

William R. Crooker — President, Chief Executive Officer, and Director

Yeah. I think what you’re seeing, you’re going to see the rent growth really start to accelerate as you move into 27.

Brendan lynch — Analyst, Barclays

Okay, great. Thanks for that.

William R. Crooker — President, Chief Executive Officer, and Director

That dynamic is, I think, why you’re seeing some. And what we’re seeing, I think others are too, is there are larger, more sophisticated tenants coming to us well in advance to try to renew their leases, to try to get ahead of some of the market rent growth that is likely to come.

Brendan lynch — Analyst, Barclays

Okay, thank you. Helpful.

William R. Crooker — President, Chief Executive Officer, and Director

Thank you.

Operator

Our next question comes from John Kim with BMO Capital Markets. Please proceed with your question.

John Kim — Analyst, BMO Capital Markets

Thank you. You’ve had a healthy leasing activity recently. I’m wondering if you could provide the leasing executed or signed during the quarter, and in particular the volume versus the 3.5 million square foot average that you had last year and the lease spreads compared to your 18 to 20% guidance.

William R. Crooker — President, Chief Executive Officer, and Director

A lot lot there, John. I don’t have the executed leases in front of me, you know, but we’re, you know, with respect to what we’re budgeting for this year, and we’re budgeting almost 18 million square feet of leasing for 2026. So it’ll be our largest just absolute square footage of leasing for the year. So when you look at our leasing spreads of 18 to 20%, what the stuff just from recollection, we see these leases getting signed and we get notified of everything. There’s nothing that I see that’s kind of a big deviation one way or the other with respect to those spreads.

You might see something a little bit lower because lease was a little closer to market or something a little bit higher because the lease was a little bit below market. But it’s not like we’re seeing a trend one way or the other. And rent bumps are holding up and we’re starting rent bumps in the three to three and a half percent range.

John Kim — Analyst, BMO Capital Markets

But just following up on that, I mean if you expect an 18 million square feet of leasing, that’s almost 30% more than what you did last year, yet you’re expecting occupancy to go down. So is this a lot of early renewals or just trying to marry versus the occupancy guidance?

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, it’s because we had so much square feet rolling. That’s the biggest. Right. So we had initially a little over 20 million square feet rolling. And so when you have that and you’ve got Your call it 75% retention rate and these leases roll throughout the year. So we budget typically a 9 to 12 month lease up time for these. So if they roll halfway through the year and it’s a non renewal and just the absolute square footage a little higher. But we’re budgeting that that lease is going to be released in 27. Right. So that’s our occupancy guy is average.

So that’s what’s impacting it. Especially another example, if you have a non renewal happening March 31, that’s going to be vacancy for nine months of the year. Right. Because we’re budgeting that to lease up in 27. Now maybe there’s some, maybe we leased up earlier. We certainly had several of those examples in 2025. I gave one earlier on this call. But our budget is that that will lease up in 27. So it really is, it’s a factor of having a large amount of square feet rolling in 2026, you know, offset by high occupancy coming into 26. So if our occupancy was lower, there’s more opportunity to backfill some of that non renewal. And it was just a, it was just an interesting dynamic that happened in 26.

But overall renewal, high occupancy numbers, good leasing spreads, you know, really great year in 25. So some great Tailwinds with respect to development. We’re seeing some good acquisition activity. I mean, I was just thrilled with how 25 went and 26, other than some of this occupancy loss is shaping up to be. I’m really happy with the projections that we’re putting out

John Kim — Analyst, BMO Capital Markets

and a similar renewal. Rate than what you’ve achieved in prior years.

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, right, exactly. It’s not like renewals are down. I think our mixed midpoint of renewal guidance, 75%.

John Kim — Analyst, BMO Capital Markets

Right. Okay, thank you. Thanks.

Operator

Our next question comes from Rich Anderson with Cantor Fitzgerald. Please proceed with your question.

Richard Anderson — Analyst, Cantor Fitzgerald

Thanks. Good morning. So just looking back, start the year last year your same store guidance was 3.5 to 4%. You easily beat that at 4.3%. You’re starting this year at 3. Not to belabor the 20 million square feet rolling in 20, 26 and the 75% retention. But if you beat that retention, obviously that’s the main driver to beating your 3% same store guidance, I assume. And you can answer that. Let me just finish the thought. Do you have line of sight into some clarity that 25% is not going to renew or is that just kind of going off of your history? Do you already have a sense of that vacancy level? Just curious if you can respond to that.

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, yeah. So I’ll answer the second question first. We, we have line of sight for a lot of our renewal or a lot of our lease expirations in the first half of the year. So there’s certainly lease expirations in the back half of the year that we’re saying, hey, these three are going to renew and this one’s going to vacate. Right. That’s how we, that’s how we build up a budget. Right. The back half of the year. It’s not, we’re not certain with what’s going to happen. But you know, our, our team is close to our tenants.

We get, we have a sense, we’re usually, you know, within 5% of our retent of our retention guidance every year. So. But it, but a lot, some of it’s speculative and with respect to, you know, outperformance or potential outperformance on same store, it’s not just retention. Retention is a factor. Right. If that goes up to 80% or 83%, yeah, that will help same store because you’re not incurring any downtime on that additional 5 to 8%. But really it’s, you know, we have lease up projections that are, the new leasing is really heavily weighted to the back half of the year. So I think we’ve got about 3 million budgeted for new leasing, most of which is expected to occur in the back half of the year. So if that leasing occurred sooner, that would be a benefit to Samester Noi. The other factor to Samester Noi, really the other components are leasing spreads.

We have pretty good insight to that. And bumps and leases. We’ve got pretty good insight to that. But the last factor is credit loss. Right. We’re budgeting 50 basis points of credit loss this year in our same store pool last year we budgeted 75 and we achieved. Well, I don’t know if achieved is the right word. We realized 20 basis points. So there is an incremental 30 basis points that we are budgeting for 2026. No new tenants on the watch list. It’s more of a broad based budget. It’s not like we’ve allocated that specifically to one tenant like we did last year with some of our credit loss budgets.

So that’s the other factor that could move same store one way or the other.

Richard Anderson — Analyst, Cantor Fitzgerald

Okay, great. Color. You mentioned early in the call, deliveries down 35% versus 2024. And I think you mentioned 180 million square feet in 2026 deliveries. What would that equate to in terms of a draft downwards versus 2025? And where do you think this all settles next year in terms of deliveries? Because in response to an earlier question, perhaps there’ll be a reignited development activity. Maybe, we’ll see. But I’m just curious, what’s the cadence of things to 2027 as you see it right now from a delivery standpoint?

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, I’ll let Steve jump in on this one to kick it off.

Steven Kimball — Executive VP & COO

Yes, I appreciate the question. You know, we’re looking at new deliveries in 2025 of about 225 million square feet. Obviously well down from previous years. And when you go forward to 2026, as you mentioned remarks, we’re looking at about 180 million square feet. We think of a stabilized market at more 250 to 300 million square feet of deliveries. So deliveries are going to be well below the average at the 180 million. And I think they start to tick back up in 2027 to some of the questions that came earlier in the call about is there going to be a little more activity about around the development world and a little more interest in going spec? And I think that’s probably the case.

So we probably move back up into the 200 to 200 plus million square feet. In 2027. But I don’t think there’ll be a big increase to the numbers that we saw a few years ago.

William R. Crooker — President, Chief Executive Officer, and Director

And then the build to suit component of that’s like 40% this year.

Steven Kimball — Executive VP & COO

Yeah, it’s moved up, you know, from 30 to the 40%, but that’s not abnormal.

William R. Crooker — President, Chief Executive Officer, and Director

Right, right.

Richard Anderson — Analyst, Cantor Fitzgerald

Okay. And last for me, and this is something I think I’m trying to will to happen. But you mentioned the 70,000 square foot manufacturing marine at least in the first quarter. Can you sort of describe that? Is that a supplier? Is that a real manufacturing? Is there any kind of power issues? Just generally? I mean, we talk a lot about your markets and being a beneficiary of onshoring and so on. You get this question a lot, I’m sure, but I’m just wondering if there’s any glimmer of manufacturing happening in your markets to a greater degree and how that might play a role longer term for stag.

Thanks.

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, I’ll let Steve answer. And nice job sneaking in that third question there, Rich.

Steven Kimball — Executive VP & COO

It’s late in the call. I figured I’m the last one.

William R. Crooker — President, Chief Executive Officer, and Director

You’re not the last one.

Steven Kimball — Executive VP & COO

I really appreciate the question. We do have a balance of demand, particularly in our development markets where we have a balance between distribution and manufacturing. And we saw that in Nashville where half our building leased up the distribution, the other half the manufacturing. And that’s voted well for the development pipeline. The lease we Talked about for 78,000 square feet in the Charlotte market that we just inked that is they have a larger manufacturing facility that’s in the sub market and that manufacturing is growing and it’s more around automotive, but specialty automotive and government uses. And so yes, it is manufacturing related.

We are seeing it grow in that market and we are seeing it elsewhere.

William R. Crooker — President, Chief Executive Officer, and Director

And I just want to characterize the manufacturing. It’s really just light manufacturing.

Steven Kimball — Executive VP & COO

Yes, yes, that’s a good point. So a lot of what we’re seeing is the heavy manufacturing is doing well. These are relief valves in some case where they need to either store the raw materials or do some light assembly that is tertiary, you know, a part of their core business.

William R. Crooker — President, Chief Executive Officer, and Director

Yeah. When we develop buildings and we develop buildings, and these ones in particular, these were developed as warehouse distribution buildings, but can also have some additional power that can be a solution for some of these ancillary manufacturing tenants.

Richard Anderson — Analyst, Cantor Fitzgerald

Perfect. Thanks very much.

William R. Crooker — President, Chief Executive Officer, and Director

Thank you.

Operator

Our next question is from Michael Carroll with RBC Capital Markets. Please proceed with your questions.

Michael Carroll — Analyst, RBC Capital Markets

Yep. Thanks, Bill. I wanted to turn back to some of Your comments on the acquisition market, I guess throughout the call, Dodd, I hear you correctly that you’re seeing more deals come across your desk right now. And if so, what is driving that increased activity? Are there just more sellers coming back to the market or is Stag doing something differently going forward?

William R. Crooker — President, Chief Executive Officer, and Director

No, it’s really sellers. And we saw that in the back half of 25. Everything just came to a halt at the beginning of the year. Last year, really from April to July, saw a lot of sellers come back to the market in the back half of 25. That was one of the reasons why we had such a successful acquisition quarter in Q4.25, and those sellers are still in the market. And we’re seeing a lot more portfolios start to come to market. Even whispers of portfolios coming to market, we’re just evaluating more transactions. So really nothing that we’re doing, just more opportunities that are in the market today.

Michael Carroll — Analyst, RBC Capital Markets

And then how competitive are these deals? I mean, I guess who are you competing with and has that changed? And just looking at your acquisition cap rate guidance, 2026 is really in line with 2025. So is kind of those cap rates kind of holding steady where they were last year?

William R. Crooker — President, Chief Executive Officer, and Director

Yeah, I mean, depending on the product, I mean, you can see you’re seeing some cap rates compress. For us, when we look at deals, one of the first things we say is, does this building fit the submarket it operates in? Right. And checks that box. And we need to make sure these deals are accretive to our portfolio and to earnings. And so for us, our cap rate guidance is a little bit of a function of our cost of capital. So we bid to where we can buy deals accretively. And if we don’t get a deal, we’re okay with that.

So that’s a little bit. But when you think about market color, yeah, we’re seeing a little bit of cap rate compression. We’re certainly seeing portfolio premiums are out there. But I would say, yeah, probably similar to 25 pricing, maybe slightly lower with respect to market. But because we operate in the CBRE Tier 1 markets, there’s a lot of opportunities and we can cast a pretty wide net. So we’re looking at so many opportunities and we’re able to pick off the ones that fit the sub markets well, but are also creative to our portfolio.

Michael Carroll — Analyst, RBC Capital Markets

Okay, great. Appreciate it.

William R. Crooker — President, Chief Executive Officer, and Director

Thanks, Mike.

Operator

We have reached the end of our question and answer session, which means that there are no further questions at this time. I would now like to turn the floor back over to William Crooker . For closing comments.

William R. Crooker — President, Chief Executive Officer, and Director

Yeah. Thanks everybody again for joining the call and then asking, asking the questions. We look forward to another great year. Certainly really proud of the results we put forth in 2025. And we’ll see you all soon at the upcoming conferences.

Operator

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