Terreno's New-Lease Rent Premium Widens in the Second Quarter
Cash rent on leases starting in the quarter was 27.7% above prior rates on 0.8 million square feet, as annualized base rent rose to $385.6 million.
Terreno Realty Corporation (TRNO), an internally managed Maryland REIT that owns industrial property in six coastal U.S. markets, posted a wider cash-rent premium on new and renewed leases in the second quarter and lifted building occupancy as it closed two Miami Countyline developments.
Cash rent changes on new and renewed leases totaling about 0.8 million square feet and 7.5 acres of improved land commencing in the three months ended June 30, 2026, were 27.7% higher than the previous rates on that space, after a 22.4% increase on 0.7 million square feet and 7.2 acres in the prior quarter. The company currently expects that, on average, rental rates on remaining 2026 expirations will be above the rates currently being paid for the same space.
Building occupancy rose to 97.6% from 96.3% at March 31, 2026, while improved-land occupancy fell to 93.3% from 96.6%. Total annualized base rent increased to $385.6 million from $368.1 million. Warehouse and distribution remained the core of the book at 80.1% of annualized base rent, with flex at 4.1%, transshipment at 6.3% and improved land at 9.5%. The portfolio comprised 316 buildings of about 20.6 million square feet, 46 improved-land parcels of 147.0 acres and four properties under development or redevelopment, leased to 697 customers.
Operating-portfolio tenant retention fell to 55.6% from 72.6% in the first quarter. Improved-land retention was 100.0%. Leases scheduled to expire in the remainder of 2026 fell to 9.3% of total annualized base rent from 12.1% at March 31. About 1.2 million square feet of 2026 expirations had been renewed or pre-leased, versus 1.1 million square feet three months earlier.
Amazon.com remained the largest tenant at 5.3% of annualized base rent, with six leases and $20.4 million of annualized base rent, up from 4.8% and $17.7 million on five leases at March 31. The top 20 customers accounted for 24.1% of annualized base rent.
During the three months ended June 30, 2026, Terreno acquired four industrial properties for about $172.3 million, or 518,000 square feet at a 5.3% weighted stabilized cap rate, using existing cash and proceeds from dispositions. The purchases included a 305,000-square-foot, three-building Washington Commerce Center in Landover, Maryland, for $77.1 million at a 5.5% stabilized cap rate, and a 98,000-square-foot Hialeah Gardens Commerce Center in Florida for $56.3 million at a 5.0% rate. Total aggregate initial investment was about $179.7 million, including $2.3 million of capitalized closing costs and $5.1 million of assumed intangible liabilities.
Operating-portfolio capital expenditures rose to $34.7 million from $20.5 million in the first quarter, including $18.7 million of non-recurring stabilization spend versus $8.2 million. Development, redevelopment, renovation and expansion spending was $25.2 million, plus $2.0 million of capitalized interest.
The company completed Countyline Building 32 in the first quarter and Countyline Building 34 in the second quarter, both in Hialeah, Florida, for a combined expected investment of $98.7 million and 384,300 square feet, 100% leased at June 30. Properties under development or redevelopment declined to four, aggregating about 0.7 million square feet with a $268.5 million expected investment, from five properties of about 0.9 million square feet and $323.8 million at March 31. Remaining projects include Countyline Buildings 35 and 36, Craftsman Circle and Whitestone Logistics, 62.4% pre-leased. In July 2026, Terreno leased 100% of Whitestone Logistics on a lease commencing July 24, 2026, and expiring July 2029; total expected investment in that property decreased to about $98.8 million and the estimated stabilized cap rate increased to 6.4%.
New York City/Northern New Jersey remained the largest market by annualized base rent at $98.6 million, or 25.6% of the total, with Miami at $74.3 million, the San Francisco Bay Area at $61.5 million, Seattle at $56.6 million, Los Angeles at $53.4 million and Washington, D.C. at $41.2 million. Weighted average remaining lease term across buildings was 4.1 years.
The company currently expects that, on average, rental rates on remaining 2026 expirations will be above the rates currently being paid for the same space.