Courtesy Granite REIT
The warehouses behind everyday deliveries are still commanding higher rents in parts of the market. Granite REIT’s latest results show how much some leases can rise when old contracts expire, even as more of its space sits vacant.
The industrial-property owner said Wednesday that rents on new leases and renewals taking effect in the third quarter averaged 35% above the expiring rents. Those deals covered about 1.6 million square feet. The figure describes that group of leases, not a 35% increase across every property or every tenant.
Granite also raised its targeted annualized distribution by 4.23%, effective with the December distribution, subject to declaration, and payable in mid-January 2027. For investors, that is a larger planned cash payout. For businesses renting warehouse space, the leasing figures are a reminder that an older contract can be much cheaper than its replacement.
Four purchases, on both sides of the Atlantic
In its third-quarter results and acquisition update, Granite detailed two Houston distribution-property purchases completed in August and two United Kingdom purchases completed in October. The October deals came after the quarter ended September 30, an important distinction when reading the results.
The Houston properties include a roughly 500,000-square-foot facility at 6411 N. Eldridge Parkway and a roughly 200,000-square-foot building on State Highway 249. Both were fully leased at acquisition. Granite reported purchase prices of US$75.6 million and US$24.2 million, respectively.
The larger Houston building was constructed in 2025 and had 5.8 years of lease term remaining. The smaller building, constructed in 2023, had two tenants and a weighted average remaining lease term of three years. Those different timelines affect how soon an owner may face renewal negotiations or vacancy risk.
In Britain, Granite acquired a roughly 300,000-square-foot facility in Coalville on October 9 and a roughly 200,000-square-foot facility in West Thurrock on October 30. Both were fully leased. The company pointed to access to major roads and distribution hubs, but its expected future yields remain projections rather than earned returns.
Higher rents, but lower occupancy
The growth story has a limit. In-place occupancy was 96.7% at September 30, down 1.3 percentage points from the end of June and 0.1 percentage point from a year earlier. Committed occupancy, which reflects leasing commitments rather than only space already occupied, stood at 97.0% on November 4.
Granite reported 6.9% growth in constant-currency, same-property net operating income on a cash basis. That measure helps separate changes at comparable properties from acquisitions and currency swings. It is a company-defined operating measure, not the same thing as accounting net income.
The company also disclosed a new lease for about 800,000 square feet in Locust Grove, Georgia, replacing an existing tenant without a vacancy between them. Granite said the new 125-month lease represented a rent increase of more than 70% against the prior lease. It is a notable individual transaction, not a forecast for the wider warehouse market.
Why a warehouse report reaches beyond property investors
Rent is one of the costs businesses must cover to store and move goods. A company approaching a lease renewal has to weigh location, moving costs and the new rent, while a landlord has to weigh higher asking rents against empty space. Granite’s figures show both sides at once.
For unitholders, the distribution increase is the clearest planned change in cash income. For tenants, the warning is more practical: a lease signed years ago may no longer be a useful guide to the next bill. Neither result means every warehouse landlord has the same pricing power.
JBizNews Desk | Toronto
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