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Armada Hoffler (AHH) Inks Lease for 35,000 Sq Ft at Wills Wharf

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Armada Hoffler Properties, Inc. AHH has inked a 35,000-sq-ft lease to rent out the 8th floor of Wills Wharf at Harbor Point to Transamerica. With this, the property is now 58% leased.

Wills Wharf was delivered last year and is a mixed-use building, which offers 325,000 square feet of Class A office and premier hotel space in the ever-growing Harbor Point neighborhood. The property’s location at the gateway to Baltimore’s Inner Harbor has likely enabled the company to secure notable companies like EY, Jellyfish and Canopy by Hilton as anchor tenants.

Moreover, the property is in close proximity to Harbor Point’s amenities and open spaces. Markedly, Harbor Point is Baltimore’s significant downtown waterfront development site between Harbor East and Fell’s Point. It can offer up to three million square feet of mixed-use space spanning 27 acres.

The important location has likely enabled the asset to enjoy decent occupancy (47.2% as of Mar 31, 2021) and is expected to continue to see demand for office space in the upcoming period as well.

Armada Hoffler’s portfolio presence in Harbor Point includes the Thames Street Wharf office building, and 1405 Point retail and apartments. Additionally, last December, the company formed a joint venture to develop and build T. Rowe Price’s global headquarters at Harbor Point.

Per management, “Transamerica’s commitment to Wills Wharf further validates Harbor Point as the premier mixed-use development in the market. We are excited to welcome Transamerica’s employees to Wills Wharf and Harbor Point.”

Understandably, as the impact of the pandemic subsides, an increasing number of companies have announced plans to return to office. This along with significant government stimulus is likely to support office market fundamentals. Hence, the lease of the office asset demonstrates the company’s participation in the rebound of the office real estate sector, which was earlier on tenterhooks due to shelter-at-home restrictions, low occupancy and a remarkable decline in leasing volume at the onset of the pandemic.

Also, the company's stabilized office portfolio occupancy was 97.2% as of Mar 31, 2021, up 20 basis points sequentially.

Shares of Armada Hoffler have jumped 51% over the past year, outperforming the industry's growth of 20.6%.

However, amid the gloomy retail fundamentals, the company’s significant exposure to retail real estate remains concerning. Particularly, mall traffic continues to decline due to a change in shopping patterns, with online purchases taking precedence. This has forced retailers to reconsider their strategy and shift investments from traditional retailing to online channels and optimize their brick-and-mortar presence.

The optimization efforts and the consequent decision to close stores by a number of retailers have raised concerns over the cash flows of mall landlords. Also, retailers unable to cope with competition have been filing for bankruptcies. This is affecting the demand for retail real estate space and emerged as a pressing concern for REITs like Armada Hoffler, Simon Property Group SPG, Kimco Realty Corporation KIM and Federal Realty Trust FRT.

Armada Hoffler currently carries a Zacks Rank #4 (Sell).

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Kimco Realty Corporation (KIM) : Free Stock Analysis Report

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