U.S. REITs report strong leasing in first quarter

Growing occupancy and rental rates helped U.S. retail REITs post healthy operating metrics in the first quarter. Particularly at open-air power and neighborhood centers, efforts to refill empty anchor boxes with more productive new tenants paid off.

At Brixmor Property Group’s open-air centers, total rent spreads were 13.7 percent. The quarter’s average base rent of $15.45 per square foot for new leases is 27 percent higher than the company's portfolio average of $12.19 per square foot.  Same property NOI increased 3.4 percent during the quarter. “Our small-shop occupancy gains and strong rent growth this quarter reflect our ongoing progress in repositioning our properties with best-in-class anchors, and the corresponding impact on our leasing productivity," said CEO Michael Carroll.

DDR said first-quarter same-store NOI was up 2.6 percent. The firm generated new leasing spreads of 26.9 percent and renewal leasing spreads of 6.7 percent. The annualized base rent per occupied square foot was $14.02 at March 31, 2015 as compared to $13.44 at March 31, 2014, an increase of 4.3 percent.

And Weingarten Realty said the average rental rate increase on new leases and renewals signed during the quarter was 8.9 percent, with rental rates on just new leases up 9.2 percent. “Same Property NOI was up 4.2 percent,” said Johnny Hendrix, executive vice president and COO. “Average base rent across the entire portfolio increased by 4 percent to $16.45 per square foot and tenant fallouts were down 24 percent from the prior year.”

Malls, too, found success in the first quarter by replacing departing tenants with more productive ones. Simon reported first-quarter same-store NOI growth of 3.5 percent. “We had a strong start to 2015,” said Chairman and CEO David Simon, on the firm’s earnings call. “Leasing activity remains strong and healthy.” He said the company’s malls and factory outlet centers recorded leasing spreads of $11.19 per square foot, an increase of 18.9 percent from the first quarter of 2014. Simon said he expects the REIT to achieve 4 percent same-store NOI growth for 2015 as a whole.

General Growth Properties said same-store NOI grew 3.3 percent in the first quarter. Lease spreads were 8.7 percent for new leases. Meanwhile tenant sales per square foot increased 4.3 percent to $590, thanks in part to tenant fallout, said CEO Sandeep Mathrani. “We got 650,000 square feet back in the first quarter from bankruptcies,” he said on the firm’s earnings call. “We've already leased almost half of that to date.”

CBL & Associates Properties reported a 0.6 percent increase in same-center NOI for the first quarter. Average gross rent per square foot increased 10.6 percent over the prior gross rent per square foot. “First quarter highlights include an impressive 7 percent increase in same-center sales and the continuation of double-digit lease spreads,” said President and CEO Stephen Lebovitz, in a prepared statement. “Same-center NOI and occupancy were impacted by the lost income from bankruptcy-related store closures; however, continued healthy demand from higher quality retailers will result in a stronger tenant mix.”

At PREIT’s malls, same-center NOI grew 6 percent in the first quarter due in part to an increase of 3.9 percent in average same-store gross rent.

Meanwhile, factory outlet REIT Tanger said same-center NOI grew 4 percent during the quarter, thanks partly to a 24.1 percent increase in average base rental rates. In the first quarter of 2014, Tanger’s blended average rental rates were up 23.9 percent. Average tenant sales at Tanger’s outlet centers increased 3 percent to $395 per square foot for the 12 months ended March 31.