Core Announcement

EastGroup Properties used the BofA NY Global Real Estate Conference 2026 to highlight a rapidly growing yet balance‑sheet‑disciplined business. Management emphasized record leasing activity, strong occupancy, a new data‑center support‑services demand tailwind, and a conservative capital structure.

Financial Results and Balance Sheet

  • Q2 2025 leasing totaled 3.9 million square feet, of which 1.5 million was development leasing—more than the entire prior year’s development leasing.
  • An additional 280,000 sq ft of development leasing was signed in Q3 2025.
  • Occupancy reached 96.1 % in July‑August 2025, surpassing the company’s first‑quarter outlook.
  • Debt‑to‑EBITDA stood at 3.0×, the lowest in the sector and still on a declining trend.
  • Debt is fully fixed‑rate and laddered by maturity, limiting refinancing risk.
  • G&A expense as a share of revenue is the sector‑lowest.
  • Development yields on cost are about 7.5 % on a straight‑line basis.
  • Cash leasing spreads sit at 19‑20 % normalized; Q3 cash spreads slightly above 20 % and straight‑line spreads near 40 %.
  • Acquisition cap rates have risen 10‑20 bps in the past 45 days to 5.25‑5.5 %.
  • The company has $320 million of available equity forward agreements under its ATM program, with a 12‑ to 18‑month drawdown window.
  • Management indicated comfort moving leverage to 4.5‑5.0× debt‑to‑EBITDA over the long term if opportunities justify it.
  • Dividend yield is 3.53 %, with a 14‑year consecutive dividend increase streak and 49 years of uninterrupted payments.

Operational Updates

  • Demand has been consistent since Q4 2024 through Q3 2025, driven by population growth of 100,000‑150,000 people per year in core markets.
  • Key demand drivers: e‑commerce, advanced manufacturing, and data‑center support services.
  • Approximately one‑third of development leasing comes from existing tenants relocating within the portfolio.
  • Tenants typically outgrow space in 2‑3 years, creating a built‑in renewal pipeline.
  • The top 10 tenants generate only 6.5 % of revenue, roughly half the sector average.
  • Markets served exhibit GDP growth about 40 % above the U.S. average.
  • Land holdings: about 1,000 acres supporting roughly 11 million sq ft of potential development; total portfolio is ~66 million sq ft.
  • Existing park capacity was ~1 million sq ft at end‑Q2 2025.
  • Recent land purchases: 100 acres in Dallas and 30 acres in Tampa across 12 parcels and 10 family members; Tampa expansion will grow East Tampa from three to five buildings near the I‑4/I‑75 interchange.
  • Due‑diligence land in Atlanta, Phoenix and other markets.
  • Preference for phased development (e.g., building two of eight buildings in a park) to match absorption, likened to “inventory management.”

Data Center Demand and Market Mix

  • Data‑center‑related users accounted for ≈25 % of development leasing in H1 2025.
  • Users include HVAC suppliers, electrical contractors, racking system providers, maintenance operators, and backup‑power tenants.
  • Concentrated in Atlanta, Dallas, Austin, Houston, San Antonio, Phoenix, Charlotte, with further activity expected in the Carolinas.
  • Industry research cited: each gigawatt of data‑center capacity requires 2‑3 million sq ft of supporting warehouse space.
  • EastGroup projects data‑center capacity in key markets could rise 4‑5× over the next five years; Dallas could match or exceed Northern Virginia’s capacity.
  • No changes to lease terms, building specifications, or tenant‑improvement spending for these users; they fit within standard frameworks.

Market‑by‑Market Observations

  • California: After 12 quarters of negative absorption, the last two quarters turned positive; recovery driven by aerospace and advanced manufacturing, though regulatory limits constrain new supply. Represents 10‑12 % of the portfolio.
  • Houston: Re‑leasing spreads have turned positive and sit above the company average, aided by data‑center supplier demand.
  • Phoenix: Benefits from proximity to Intel manufacturing, suppliers, and an LG Energy Solution battery plant; data‑center demand emerging.
  • Dallas: Supported by Texas Instruments, Tesla suppliers, and growing data‑center capacity.
  • Charlotte & Carolinas: Anticipated increase in data‑center demand; a pre‑lease opportunity may arise with an existing customer.

Future Outlook

  • Development starts raised to $325 million, with expectations of further upward pressure.
  • Development yields expected to remain near 7.5 % on a straight‑line basis.
  • Development leasing momentum expected to continue through the rest of 2025 and into 2026.
  • Rent growth is projected to re‑accelerate as construction costs rise (higher diesel, gasoline, steel costs, longer lead times, higher interest‑rate carry).
  • Cash leasing spreads expected to normalize around 20 %, possibly declining slower than in past cycles due to improving rent growth.
  • Same‑store NOI growth in 2027 is expected to exceed that of 2026.
  • Revenue grew 10.72 % YoY over the last twelve months, with a gross profit margin of 73.61 %.
  • If long‑term rates stay higher, the sector’s biggest impact would likely be reduced new supply.
  • Third‑party capital is projected to become more important than balance‑sheet capital for public REITs over the next three years.
  • Long‑term strategy focuses on fast‑growing markets: Dallas, Phoenix, Atlanta, Charlotte, Houston, Austin, Nashville, Raleigh, Orlando.

Capital Allocation and Transaction Environment

  • Cap rates on stabilized assets have risen 10‑20 bps to 5.25‑5.5 %.
  • Deal flow has improved; more offers are sticking, potentially allowing the company to outperform its acquisition budget.
  • Development is the preferred path for risk‑adjusted returns; the company’s valuation skill in acquisition pricing stems from deep knowledge of its own development costs.
  • Management’s mantra: “If we can’t buy it, we’ll build it.”
  • Debt usage remains comfortable; balance sheet remains conservative relative to peers.

Q&A Highlights

  • Data‑center demand described as “very durable” with a long runway.
  • Development leasing from data‑center users remains at ≈25 % of H1 2025 development leasing.
  • Lease terms for data‑center tenants are indistinguishable from other tenants.
  • Cash spreads are sustainable at 19‑20 %, with regional variation (California slower, Houston stronger).
  • About 1 million sq ft of runway remains in existing parks; additional capacity from new land purchases.
  • Preference for development over acquisition due to higher risk‑adjusted returns; current development yields around 7.5 % on cost.
  • Comfortable leverage at 3.0× debt‑to‑EBITDA; willing to move to 4.5‑5.0× if justified.
  • Higher long‑term rates likely to reduce new supply.
  • Third‑party capital expected to play a larger role for REIT growth; same‑store NOI growth in 2027 projected higher than 2026.

Overall Message: EastGroup Properties presented a strong operating position with record leasing, high occupancy, disciplined leverage, and a new data‑center support‑services demand tailwind, while maintaining a cautious, phased development approach and a focus on fast‑growing Sun Belt markets.