Terreno Realty Corporation TRNO recently shelled out $17.6 million for the purchase of an industrial property in San Leandro, CA. The move comes as part of its acquisition-driven growth strategy.
The property comprises three industrial distribution buildings encompassing roughly 112,000 square feet on 7.8 acres of land. With an advantageous location at 2002-2150 Edison Avenue, west of I-880 and immediately neighbouring the REIT’s three-building Whitney Street portfolio, as well as superior designing for logistics purpose, the property is fully leased to 13 tenants. All of the leases will expire by June 2023. It has an estimated stabilized cap rate of 5.6%.
Notably, amid an e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, demand for logistics infrastructure and efficient distribution networks has been increasing. This is helping the industrial real estate market flourish. In addition, apart from the fast adoption of e-commerce, logistics real estate is anticipated to benefit from a likely increase in inventory levels post the global health crisis, over the long term, offering scope to industrial landlords, including Terreno Realty, Duke Realty DRE, Prologis PLD, and Rexford Industrial Realty REXR, among others, to enjoy a favorable market environment.
Terreno Realty is also capitalizing on such scopes and is focused on expanding its portfolio on acquisitions. It targets functional assets at in-fill locations, which enjoy high-population densities and are located near high-volume distribution points. This March, the company acquired an industrial property in Hialeah, FL, for $48.1 million, net of free-rent credits.
Through such efforts, the company is well poised to fortify its portfolio in the six major coastal U.S. markets — Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami and Washington, DC — which display solid demographic trends and witness healthy demand for industrial real estates.
However, with the asset category being attractive in these challenging times, there is a development boom in a number of markets. This high supply is likely to fuel competition and curb pricing power. Specifically, new supply is likely to put pressure on vacancy level which might shoot up to some extent in the upcoming quarters.
Terreno Realty currently carries a Zacks Rank #3 (Hold). In the past month, the company’s shares have gained 6.8% compared with its industry's rally of 7.7%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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