Oct 22, 2026 earnings call — Strong leasing, higher development starts
EastGroup reported FFO per share of $2.45 and raised development starts to $390 million.
Revenue $0.2B (est $0.2B) · EPS $1.46 (est $1.36)
Key quotes
"The end result, we completed 2.9 million square feet of second gen deals, setting a new record for EastGroup."
"In development, the supply environment for shallow bay industrial remains favorable."
"we now have $695 million in forward equity share agreements outstanding at a weighted average price of approximately $202 per share."
Analyst Q&A 16
Why development starts rose
Q (Blaine Heck · Wells Fargo): He asked what drove the jump in development starts and how much was demand-pulled versus speculative. He also asked if data center competition or construction timelines/costs are keeping projects sidelined.
A: Management said the increase was largely market-pulled, led by a pre-lease that made a building 100% leased and many smaller leases that pulled forward development. They noted data centers haven't taken many sites from them but do cause rising steel and construction costs as a ripple effect. They also cited strong leasing activity in Mesa Gateway, Phoenix, and expect more pre-lease opportunities.
"We got a pre-lease opportunity signed within our pipeline, so that building is 100% leased, and that was one of the bigger jumps." — Marshall Loeb (CEO)
Capital deployment, yields, rents
Q (Craig Mailman · Citi): He wanted to know where replacement cost rents and yields on incremental starts are trending and how the firm sees the mix of acquisitions versus development given cap rate uncertainty. He also asked about capital availability.
A: Management said an acquisition window opened in Q3, giving opportunistic deals, and that cap rates have generally risen though not uniformly across markets. They said construction costs are up and likely to keep rising, which should push rents higher, and they feel their recent purchases are accretive and positioned for rent growth.
"On the development side, construction costs are up probably 5%-10% and continue to move up." — Marshall Loeb (CEO)
Market rent growth and spreads
Q (Samir Khanal · BofA): He asked how much accelerated spreads came from embedded mark-to-market versus market rent growth and what market rent growth looks like, especially in Sun Belt markets and next year.
A: Management said rent growth is uneven but solid in Carolinas, Georgia, Texas, and Arizona, with year-to-date growth around mid-single digits. They expect higher rent growth next year given tightening markets and rising construction costs, and they think releasing spreads still have room to re-inflate.
"We are seeing pretty good rent growth, kind of year-to-date, maybe mid-single digits." — Marshall Loeb (CEO)
Why NOI and occupancy beat expectations
Q (Michael Mueller · JPMorgan): He asked whether the occupancy and NOI outperformance came from faster openings, fewer fallouts, or lower bad debt.
A: Management said the large majority of the 50 basis point occupancy outperformance came from a company record 2.9 million square feet of second generation leases signed in the quarter. They also cited a few tenant holdovers that added 10-15 basis points and some early move-ins, and raised the fourth quarter occupancy guide by 40 basis points.
"We signed a company record of 2.9 million square feet of second generation leases during third quarter." — Staci Tyler (CFO)
Acquisition pipeline and cap rate moves
Q (Todd Thomas · KeyBanc): He asked about the acquisition pipeline as they shift focus to 2027 and asked them to quantify observed cap rate increases.
A: Management said cap rates are fluid but have moved about 20-30 basis points, roughly 25 basis points to date. They described a now-open window for opportunistic acquisitions, will stay disciplined, balance equity and debt funding, and buy assets that are top-quartile and accretive, some with modest vacancy to add value.
"I would say on cap rates, it is fluid, and that it is still a moving target a little bit, but probably 20-30 basis points, call it 25 basis points is what we have seen to date." — Marshall Loeb (CEO)
Where to push rents versus keep occupancy
Q (Tom Carter-Wood · U.S. Bancorp): He asked where in the portfolio they can push rents now and where they still prioritize occupancy.
A: Management said they generally prioritize occupancy and noted strong retention, running almost 79% year-to-date, which helps leasing costs. They said rents are growing fastest in Texas, Atlanta, the Carolinas, and Phoenix, while many California submarkets are still choppy and weaker.
"It is hard to know. Look, there are always things rolling, more of a dollar cost average of let us get spaces leased at market and make the best deal we can and move on." — Marshall Loeb (CEO)
Percent of portfolio that can raise rents
Q (Nick Thillman · Baird): He asked what percentage of the portfolio can push rents and how wide the performance gap will be between best and worst markets over the next 12 months.
A: Management said a large majority—Marshall estimated about 90%—can push rents, excluding some of California (about 14% of NOI) where markets lag. Marshall suggested worst markets could be flat while the best could reach low double-digit growth; Brent emphasized broad-based rent push potential across most markets.
"I don't think there's one or two markets that stand out as being the only ones that we can push rents." — Brent Wood (COO)
Ground leases and reset risk
Q (Alexander Goldfarb · Piper Sandler): He asked how they view ground leases, the reset structures, and how they underwrite them to be long-term investments rather than timed holdings.
A: Management said they are over 95% fee simple and are very strategic with ground leases when they accept them. They said some DFW leases are 40 years with payments substituting for taxes and tribal leases can be irreplaceable land; they sell some ground-leased assets to keep the exposure minimal.
"Where we do have ground leases, we've tried to be extremely strategic about them." — Marshall Loeb (CEO)
Data center leasing and Amazon impact
Q (John Kim · BMO): He asked how much of development leasing this quarter came from data center suppliers versus prior and what impact Amazon Project Mercury might have on their markets or portfolio.
A: Management said they signed about 135,000 sq ft of data center-related uses in the quarter and year-to-date that is about 15% of new lease activity. They said Project Mercury is early but the described need for 100,000-200,000 sq ft infill facilities would fit their portfolio well if it develops.
"As far as data center related uses, we signed about 135,000 sq ft in the quarter." — Reid Dunbar (PRESIDENT)
Bad debt and watchlist risks
Q (David Rodgers · Raymond James): He asked whether any parts of the portfolio or tenant types should be watched more closely given higher rates and historical bad debt patterns.
A: Management said bad debt remains steady around their historical average of 30-35 basis points of revenue and the tenant watch list is steady with typical turnover. They noted no current concerns by geography or industry, though 3PLs can be more volatile historically and they'd watch consumer spending as a driver.
"our bad debt has been very steady and in line with our historical average of around 30-35 basis points of revenue." — Staci Tyler (CFO)
Data center tailwind durability and plan B
Q (Rich Anderson · Cantor Fitzgerald): He asked if data center demand is temporary and what the plan B is if it slows, and whether industrial fundamentals would be weaker without that demand.
A: Management said they did not specifically target data center tenants; many found them and most data center leases in their portfolio support services rather than the centers themselves. They said plan A is the same as plan B—traditional users can backfill—and noted data center-related revenue is about 1.5% today while they monitor concentration.
"I would say, look, I'd love to say we saw this all coming, and we built buildings to accommodate this data center kind of wave of new demand." — Marshall Loeb (CEO)
Same-store NOI and expense drivers
Q (Jon Petersen · Jefferies): He asked about the step-down in same-store NOI implied into Q4 and how much of the same-store expense increase is one-time versus ongoing inflation.
A: Management said the year-to-date same-store strength is strong and they raised annual cash same store PNOI guidance to 7.5%. They explained the Q4 comps are harder because last year's back half was strong, but they increased Q4 same-store growth projection by 100 basis points versus prior guidance.
"We've increased our projection for same store growth in fourth quarter by 100 basis points over our prior guidance." — Staci Tyler (CFO)
Leasing pipeline decision timing
Q (Michael Griffin · Evercore): He asked if customer decision timeframes have changed—are previously hesitant tenants now committing—and whether demand will accelerate or hold steady next year.
A: Management said demand looks steady; some leases that had been long in the works closed this quarter and Phoenix showed quicker decision-making with several spec-ready deals. They expect steady demand into next year but stand ready to play offense if momentum improves.
"We did have a strong quarter where some leases that had been worked for some period of time." — Brent Wood (COO)
Could data center demand surge and rent upside
Q (Ronald Kamdem · Morgan Stanley): He asked if data center-related demand could double or triple next year and how much upside there could be to occupancy and re-leasing spreads if rent growth accelerates.
A: Management said data center activity could increase substantially and they are well-positioned since many of those markets overlap their footprint. They noted re-leasing spreads would follow if market rent growth accelerates, and Marshall said planned and permitted supplier networks in key markets could be roughly 4x what exists today, a material tailwind.
"based on what's existing today, when you look at the main markets Reid mentioned, the Texas, Arizona, Atlanta, Carolinas, what's planned and permitted, it's typically about 4x, if I picked a number, versus what exists today." — Marshall Loeb (CEO)
Risks considered raising guidance
Q (Michael Lewis · Truist): He asked what risks they considered when raising guidance and what could spoil the outlook besides data centers.
A: Management said they worry most about keeping their team and the health of consumer demand; rising interest rates affecting consumer credit could matter. They said data center tenants seem more stable than some prior waves, and they try to keep the balance sheet and team prepared for inflection points.
"I would say things that keep us up at night or keep me up at night, it is always, look, we have got a great team, and a lot of other people know we have a great team, so we have got to keep our team." — Marshall Loeb (CEO)
Cap rates on recent acquisitions
Q (Vince Tibone · Green Street): He asked for cap rates on acquisitions closed in 3Q and since, and whether recent pricing reflects a new bid level post-rate moves.
A: Management said assets purchased year-to-date yield a stabilized straight-line yield around mid 6% to 6.5% and they feel good about that given some vacancy to add value. They said they haven't been the most aggressive bidder but have been likely to close and are evaluating per-square-foot replacement value.
"our stabilized straight line yield is going to pencil out right around a 6.5%, mid 6% number." — Reid Dunbar (PRESIDENT)