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Terreno Realty (TRNO) Sees Impressive Demand, Renews Lease

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Zacks Equity Research
·3 min read
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Terreno Realty Corporation TRNO is experiencing decent demand for its properties from both new and existing tenants. The company recently announced lease renewal with a transportation and logistics services provider for a property in South Brunswick, NJ.

With the renewal, the lease of an area of about 221,000 square feet will now expire on Nov 30, 2028 instead of Nov 30, 2021.

The company has been experiencing decent leasing and renewal activities in December. Particularly, the company renewed leases for two properties and executed a lease for a vacant improved land parcel in California. The renewal leases encompass an area of about 306,000 square feet, while the improved land parcel covers an area of 2.5 acres.

Further, Terreno Realty executed a full-property lease in Rancho Dominguez, CA for an improved land parcel with a regional provider of trucking services. The land parcel spans an area of 2.5 acres and was acquired by the company on Dec 2. The lease will commence on Dec 31, 2020 and expire on Feb 28, 2026.

The leasing and renewal activities reflect the solid demand for Terreno Realty’s well-positioned properties. In fact, the industrial asset class has grabbed the limelight for showing resilience amid the coronavirus pandemic with low vacancy rates, high asking rents and robust rent collections. There has been a notable increase in e-commerce’s share of total retail sales, spurring demand for warehouses and distribution spaces. Apart from the fast adoption of e-commerce, the industrial real estate space is anticipated to gain traction over the long run from a likely rise in the inventory levels of companies as a precaution for any supply-chain disruptions.

This, in turn, will likely keep supporting industrial landlords like Terreno Realty, Prologis PLD, Duke Realty Corp. DRE and Plymouth PLYM to enjoy a favorable market environment.

Amid these, Terreno Realty 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. 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.

Nevertheless, the pandemic’s adverse impact on the economy might thwart demand for spaces to some extent in the near term. Rent relief and deferrals for tenants are likely to be concerns as well. Also, surplus supply is a headwind for the industrial real estate market.

Terreno Realty currently carries a Zacks Rank #3 (Hold). The company’s shares have appreciated 6.2% as against the industry's decline of 4.7% over the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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