Jessica Zheng

Jessica Zheng asked if EastGroup is observing a pickup in onshoring or nearshoring related leases in any of its markets recently.

Answer

President Reid Dunbar confirmed a definite pickup in nearshoring activity, based on feedback from brokers and prospects. He specifically noted markets like Houston and Dallas are seeing an uptick in advanced manufacturing users requiring higher power, anticipating this trend to be a tailwind for EastGroup through ancillary users.

Jessica Zheng inquired whether EastGroup is observing a recent pickup in onshoring or nearshoring related leases across any of its markets.

Answer

President Reid Dunbar confirmed that activity related to nearshoring has definitely picked up, based on feedback from the brokerage community and prospects. He specifically mentioned Houston and Dallas as markets seeing an uptick in advanced manufacturing and users requiring higher power, indicating that this trend will be a tailwind for EastGroup, particularly benefiting ancillary users in their markets.

Jessica Zheng inquired if EastGroup Properties is observing any changes in the overall tenant credit quality or lease term preferences among smaller tenants, who have been more active in new leases.

Answer

Brent Wood, CFO, confirmed that EastGroup Properties has not observed any significant changes in overall tenant credit quality or lease term preferences. He reiterated that bad debt remains low, and the company consistently vets tenant credit. Wood added that tenant improvement packages, typically involving 12-15% office finish in warehouses, have also remained consistent, indicating no shift in the specific type or credit profile of tenants being evaluated.

Jessica Zheng inquired about any observed changes in overall tenant credit quality or lease term preferences among the smaller tenants who have been more active in new leases.

Answer

CFO Brent Wood confirmed that there have been no significant changes in tenant credit quality or lease term preferences. He reiterated that bad debt remains low, and the company consistently vets tenant credit. He also noted that TI packages and the typical 12-15% office finish in warehouses have remained consistent, indicating no shift in the specific type or credit profile of tenants being evaluated.

Jessica Zheng asked for color on the Austin market, noting the company's recent activity and large land bank there, given that it has recently experienced higher supply deliveries.

Answer

President and CEO Marshall Loeb expressed strong long-term optimism for Austin, citing its economic drivers and topographical limits on development. He acknowledged the recent supply but noted they acquired land at a discount and are strategically timing developments in submarkets like Hays County and Round Rock to navigate competition and capitalize on the market's long-term growth.

Jessica Zheng from Green Street Advisors inquired whether multi-tenant developments are easier to lease than single-tenant ones and the strategic considerations for each. She also asked for color on the market fundamentals in Nashville, including demand drivers and the current supply situation.

Answer

EVP of Real Estate Operations Steve Kimball explained that while buildings are designed with the flexibility to be multi-tenant, they have successfully leased several as single-tenant facilities, demonstrating the importance of optionality. Regarding Nashville, Kimball and CEO William Crooker highlighted its healthy fundamentals, driven by a balance of manufacturing and distribution, strong population growth, and a relatively disciplined supply pipeline.

Jessica Zheng of Green Street Advisors, LLC inquired about the behavior of private industrial developers in the current environment, specifically whether they are offering elevated concessions or cutting rents on their speculative development projects to secure tenants.

Answer

EVP Peter Schultz observed that where tenants have more choices, concessions have increased, but there isn't a material difference across the board. CIO Johannson Yap added that private developers are cautious about new starts due to expensive debt and are often sitting on land while they lease up existing vacant developments.

Jessica Zheng of Green Street Advisors asked about the current behavior of private industrial developers, specifically if they are offering higher concessions or cutting rents to secure tenants for spec developments.

Answer

EVP Peter Schultz noted that concessions have increased in markets with more available choices, but the difference is not material across the board. CIO Johannson Yap added that private developers are generally cautious about new starts due to expensive debt and existing vacancies, with many opting to hold onto their land.