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Plymouth Industrial REIT PLYM continues to showcase its resilience and growth potential in the industrial real estate market, as evidenced by its leasing and development activity in the first quarter of 2024. With a commitment to providing cost-effective, functional, flexible and safe industrial spaces, Plymouth Industrial REIT has not only maintained high occupancy rates but also embarked on a strategic path toward sustained profitability.

Leases commencing during the first quarter totaled 1,387,977 square feet, all with terms of at least six months. This healthy leasing activity consisted of both renewal and new leases, with 928,217 square feet associated with renewals and 459,760 square feet of new leases. PLYM anticipates a 17.1% increase in rental rates on a cash basis from these leases, contributing to its strong performance.

As of Mar 31, 2023, the company's portfolio occupancy stood at an impressive 96.9%, reflecting recent new developments now in service. Furthermore, same-store occupancy as of the same date was 98.3%, demonstrating Plymouth's proficiency in tenant retention and property management.

Executed leases scheduled to commence during 2024, inclusive of first quarter activity, aggregated to 3,974,062 square feet. All of these leases are associated with a period of at least six months. These leases comprised 3,209,506 square feet of renewal leases and 764,556 square feet of new leases, of which 14,000 square feet remained unoccupied at the beginning of 2024.

The rental rates from these leases will increase by 16.3% for the company on a cash basis (20.2% of these leases were related to contractual renewals). These leases account for 55.9% of its total 2024 expirations, illustrating management's proactive approach to securing future revenue streams.

Plymouth continues to advertise its 769,500-square-foot Class A industrial property in the St. Louis Metro East submarket. The building is now leased to a tenant with a lease expiring on July 31, 2024.

Plymouth's development initiatives are equally noteworthy. The final project in the first stage of its development program, a fully leased 52,920-square-foot building in Jacksonville, is anticipated to be operational in the third quarter of this year.

Furthermore, the company inked a seven-year, 58,008-square-foot lease for its 154,6922-square-foot industrial building in Cincinnati. The company’s development program is now 93% leased. These developments signify Plymouth Industrial REIT's commitment to expanding its footprint and providing high-quality spaces tailored to the evolving needs of its tenants.

The company's upcoming first-quarter earnings release on May 1, 2024, after market close, and a conference call on May 2, is an event investors should keep an eye on for further insights into its financial performance and strategic outlook.

Amid an e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, the demand for industrial real estate space has been shooting up. Apart from the fast adoption of e-commerce, the industrial real estate space is poised to gain traction over the long run from a likely rise in the inventory levels of companies as a precaution for any supply-chain disruption. This will offer opportunities to industrial landlords, including Plymouth, Prologis PLD and EastGroup Properties EGP, to enjoy a favorable market environment.

Plymouth, with its strong leasing activity and strategically planned development program, is well-positioned to benefit from these market trends. The company's impressive leasing results, including strong renewal rates and new leases, highlight its ability to attract and retain tenants. The anticipated rental rate increases demonstrate the financial growth potential of PLYM. Additionally, ongoing development projects contribute to portfolio expansion and provide avenues for future revenue generation.

However, the elevated supply of industrial real estate in several markets is likely to intensify competition, create pressure on vacancy levels and curb Plymouth’ pricing power, thereby restricting rent growth momentum to some extent. High interest rates add to its concerns.

Over the past three months, shares of this Zacks Rank #4 (Sell) company have declined 10.3% compared with the industry’s fall of 4%.

Image Source: Zacks Investment Research

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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