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Gladstone (GOOD) Extends Lease With Quest for Office Property

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Gladstone Commercial Corporation GOOD recently inked a 10-year lease extension with Quest Diagnostics Clinical Laboratories Inc. at the company’s 4690 Parkway Drive office building in Mason, OH.

With this lease extension, Quest will continue to occupy 39,417 square feet of space at the 60,019-square-foot property through Jun 30, 2030. Quest is a global preeminent provider of diagnostic information services. 

Quest has been a tenant at the building since 2002, when it leased 86% of the building. In 2006, the company expanded its presence in the entire building and subsequently extended lease for additional eight years in 2012. 

This single-story property offers Quest with modern office features, data center and a dock area that will support technology operations and customers. Per management, the lease expansion will boost Gladstone’s cash and straight-line rent, as well as enhance the company’s portfolio weighted average lease term.

Notably, amid resilient economy and stable job-market environment, coupled with high consumer sentiment, healthy growth in demand for office space is anticipated to continue. Gladstone’s office portfolio is well positioned to benefit from these strong tailwinds.

In fact, the company has resorted to a capital-recycling program, which is aimed at selling non-core assets, and using the proceeds to de-lever its portfolio and acquire properties in the stronger target-growth markets. Moreover, Gladstone has improved its industrial portfolio through acquisitions and other deals in the pipeline.

Additionally, portfolio expansion will likely fuel growth, as e-commerce boom and a healthy manufacturing environment are spurring demand for the industrial real estate category. This is highly encouraging for Gladstone Commercial, as well as other REITs, including Duke Realty Corp. DRE, Prologis PLD and Rexford Industrial Realty, Inc. REXR.

As such for Gladstone Commercial, which is focused on investments in mission-critical facilities occupied by middle market to investment-grade businesses located in growing markets, the efforts will likely be accretive to its earnings and drive long-term growth.

However, shares of Gladstone Commercial have underperformed the industry it belongs to in the past three months. This Zacks Rank #4 (Sell) company’s shares have declined 4.3%, wider than the industry’s loss of 0.3% during the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Further, recovery in the industrial market has continued for long and chances of any striking decline in availability rates are less. In fact, a whole lot of new buildings are slated to be completed and made available in the market in the near term, leading to higher supply and lesser scope for rent and occupancy growth. Also, any protectionist trade policy will have an adverse impact on economic growth. This, in turn, might affect Gladstone’s industrial portfolio and limit its growth tempo.

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