Alexandria Real Estate Equities, Inc. ARE reported third-quarter 2026 funds from operations (FFO), as adjusted, per share of $1.54, beating the Zacks Consensus Estimate of $1.52 by 1.3%. However, FFO declined 30.6% from $2.22 in the year-ago quarter.
Revenues fell 10.7% year over year to $671.2 million but surpassed the consensus estimate of $644.2 million by 4.2%. The results reflected strong leasing activity, with total leasing volume exceeding 1.2 million rentable square feet (RSF), partially offset by lower occupancy and rental rates.
ARE's Leasing Volume Gains Momentum
Alexandria executed leases covering 1.24 million RSF, up 19% from 1.04 million RSF in the preceding quarter. Leasing volume exceeded the first-quarter 2025 through second-quarter 2026 quarterly average of 979,822 RSF by approximately 256,000 RSF, marking the highest quarterly volume since the fourth quarter of 2024.
Lease renewals and re-leasing accounted for 785,069 RSF, while leasing of previously vacant space totaled 450,961 RSF, marking the second-highest quarterly volume in company history. Existing tenants generated 74% of leasing activity during the trailing 12 months.
ARE's Rental Rates Remain Under Pressure
Rental rates on lease renewals and re-leasing declined 2.4% during the third quarter compared with a 0.7% decrease in the preceding quarter. On a cash basis, rental rates fell 3.3%, improving from the 4.3% decline recorded in the second quarter.
The tenant base continued to provide cash-flow visibility. Investment-grade or publicly traded large-cap tenants contributed 57% of annual rental revenues. Moreover, 97% of leases contained annual rent escalations, while the weighted-average remaining lease term stood at 7.7 years.
ARE's Occupancy Improves Marginally
Occupancy of operating properties was 87.1% as of Sept. 30, 2026, up from 86.9% at the end of June. The improvement reflected lease commencements and the reclassification of vacant properties held for sale, partly offset by the addition of 311 Arsenal Street to the operating portfolio.
Executed leases covering 1.3 million RSF have not yet commenced. Including this space, occupancy would have been 90.8%. These leases are expected to generate approximately $52 million in annual rental revenues, with a weighted-average future occupancy date of June 2027.
ARE's Same-Property NOI Declines
Same-property net operating income (NOI) declined 6.7% year over year, while same-property NOI on a cash basis decreased 2.8%. The declines primarily reflected lower occupancy following previously disclosed lease expirations involving 282,878 RSF.
The company's operating margin was 66%, while the adjusted EBITDA margin came was 65%. Interest expense increased 45.3% year over year to $79.7 million. General and administrative expenses rose 40% to $40.9 million.
ARE Advances Development Deliveries and Asset Sales
In the third quarter, Alexandria placed into service 529,061 RSF of development and redevelopment projects, generating incremental annual NOI of $40 million. The projects were 84% occupied at delivery.
The company expects projects scheduled for delivery through 2028 to contribute an additional $85 million in incremental annual NOI. Alexandria also completed $234.4 million of dispositions during the third quarter and sold an approximately 29% noncontrolling interest in Campus Point by Alexandria for $475 million in October.
ARE Maintains Significant Liquidity
Alexandria ended the third quarter with $4.56 billion of liquidity and a weighted-average remaining debt term of 11.6 years. Only 6% of total debt matures through 2028. Net debt and preferred stock to adjusted EBITDA was 6.9X on a quarterly annualized basis.
The company extended its $5 billion unsecured senior line of credit to January 2032. It continues to target a fourth-quarter 2026 annualized leverage ratio of 5.6X to 6.2X, supported by asset dispositions, partial-interest sales and other capital sources.
ARE Narrows Its 2026 FFO Outlook
Alexandria narrowed its 2026 adjusted FFO guidance to $6.38-$6.42 per share from $6.35-$6.45. The midpoint remained unchanged at $6.40, reflecting a tighter expected range for full-year results. The Zacks Consensus Estimate for the same is currently pegged at $6.39.
The company maintained its year-end occupancy outlook of 86.2-87.8%. It also continues to expect same-property NOI to decline 8.5-10.5% and rental rates on renewals and re-leasing to decrease 1-9%.
ARE’s Zacks Rank
Alexandria currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alexandria Real Estate Equities, Inc. Price, Consensus and EPS Surprise
Alexandria Real Estate Equities, Inc. price-consensus-eps-surprise-chart | Alexandria Real Estate Equities, Inc. Quote
Performance of Other REITs
Crown Castle Inc. CCI reported third-quarter 2026 adjusted funds from operations (AFFO) per share of $1.24, up 10.7% year over year. The metric surpassed the Zacks Consensus Estimate of $1.20 by 3.3%. CCI’s results benefited from lower interest expenses.
Quarterly revenues of $995 million declined 7.2% year over year and missed the consensus estimate of $1.01 billion by 1.4%. The decline was due to lower site rental revenues and services revenues.
Prologis, Inc. PLD reported third-quarter 2026 core FFO of $1.60 per share, up 7.4% from $1.49 a year earlier. The figure surpassed the Zacks Consensus Estimate of $1.58 by 1.3%.
PLD’s rental revenues rose 7.4% year over year to $2.21 billion, exceeding the $2.20 billion consensus estimate by 0.2%. Results benefited from higher rental revenues, steady leasing demand and improved occupancy levels. Growth in SSNOI further supported the performance. However, elevated operating expenses weighed on the results to some extent.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.
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