EastGroup Properties, Inc. (EGP) Q3 2022 Earnings Call Transcript

EastGroup Properties, Inc. (NYSE:EGP) Q3 2022 Earnings Conference Call October 26, 2022 11:00 AM ET

Company Participants

Marshall Loeb - President and Chief Executive Officer

Keena Frazier - Director, Leasing Statistics

Brent Wood - Chief Financial Officer

Conference Call Participants

Craig Mailman - Citi

Alexander Goldfarb - Piper Sandler

John Nickodemus - BTIG

Jason Belcher - Wells Fargo

Nick Yulico - Baird

Bill Crow - Raymond James

Ki Bin Kim - Truist

Michael Carroll - RBC Capital Markets

Operator

Good day and welcome to the EastGroup Properties Third Quarter 2022 Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Marshall Loeb, President and CEO. Please go ahead.

Marshall Loeb

Good morning. And thanks for calling in for our third quarter 2022 conference call. As always, we appreciate your interest. Brent Wood, our CFO, is also on the call this morning. Since we will make forward-looking statements, we ask that you listen to the following disclaimer.

Keena Frazier

Please note, that our conference call today, will contain financial measures such as PNOI and FFO that are non-GAAP measures as defined in Regulation G. Please refer to our most recent financial supplement and to our earnings press release, both available on the Investor page of our website, and to our periodic reports furnished or filed with the SEC for definitions and further information regarding our use of these non-GAAP financial measures and a reconciliation of them to our GAAP results.

Please also note that some statements during this call are forward-looking statements, as defined in and within the safe harbors, under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.

Forward-looking statements in the earnings press release, along with our remarks, are made as of today and reflect our current views about the company’s plans, intentions, expectations, strategies and prospects based on the information currently available to the company and on assumptions it has made.

We undertake no duty to update such statements or remarks whether as a result of new information, future or actual events or otherwise. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. Please see our SEC filings, including in our most recent annual report on Form 10-K for more details about these risks.

Marshall Loeb

Thanks, Keena. Good morning and thank you for your time. I will start thanking our team for another strong quarter. They continue performing at a high level and capitalizing on opportunities in a fluid environment. Our third quarter results were strong and demonstrate the quality of our portfolio and the resiliency of the industrial market.

Some of the results produced include funds from operations coming in above guidance, up over 14% for the quarter ahead of our initial forecast. This marks 38 consecutive quarters of higher FFO per share as compared to the prior year quarter, truly a long-term trend. Our quarterly occupancy averaged 98.3%, which was up 120 basis points from third quarter 2021.

And at quarter-end, we're ahead of projections at 99% leased and 98.5% occupied matching our company record occupancy. Similarly, quarterly releasing spreads were strong both above 39% GAAP and 23% cash. Year to date releasing spreads are similar at 36% and 22% cash – GAAP and cash respectively.

Finally, cash same store NOI reached 8.7% for the quarter, and stands at 8.9% year to date. In summary, I'm proud of our year to date results and the positioning this gives us to finish the year. And today, we're responding to strengthen the market and user demand for industrial product by focusing on value creation via raising rents and new development. I'm grateful we ended the quarter 99% leased.

To demonstrate the market strength over the past two years, have produced a number of quarterly records for the company. Another trend we're seeing is more widespread rent growth. Releasing spreads have trended higher than in 2021 and more importantly across a broader geography. I'm happy to finish the quarter at $1.77 per share in FFO and raise annual guidance to [$6.93] [ph] per share, up 13.8% from the 2021 record.

Helping us achieve these results is thankfully having the most diversified rent role in our sector, with our top 10 tenants only accounting for 8.9% of rents. And as we've stated before, our development starts are pulled by market demand within our parks. Based on our read-through, we're adjusting forecast 2022 stocks to 375 million. Through September 30, we've completed 11 development and value add projects with 10 of those rolling into the operating portfolio fully leased at an average yield of 6.6%.

In addition to these, we have another 8 projects which are 100% leased prior to construction completion. We're happy with the consistent value creation these represent and we'll continue to closely monitor development progress given heightened economic uncertainty.

Given the shift in capital markets early second quarter, we're taking a measured approach on new core investments. We're also carefully evaluating each new development site given the level of demand and longer timeframe often required to put these sites into production.

Brent will now speak on several topics, including our updated projections within the 2022 guidance.

Brent Wood

Good morning. Our third quarter results reflect the terrific execution of our team, strong overall performance of our portfolio, and the continued success of our time tested strategy. FFO per share for the third quarter was on the high-end of our guidance range at $1.77 per share and compared to third quarter 2021 of $1.55 represented an increase of 14.2%. The outperformance continues to be driven by our operating portfolio performing better than anticipated, particularly occupancy and run rate growth.

From a capital perspective, macroeconomic concerns have caused the stock market to further decline, including our share price. And as a result, we only issued 1 million of equity. We have been intentionally deleveraging the balance sheet over the past several years placing ourselves in an advantageous position to pivot to debt proceeds for capital sourcing.

During the third quarter, we closed on 125 million of senior unsecured notes with a weighted average fixed interest rate of 4.04%. This issuance included two tranches, one for 75 million with a five-year term and another for 50 million with a two-year term. We also agreed to terms on the private placement of two senior unsecured notes totaling 150 million.

One note for 75 million has an 11-year term at an interest rate of 4.9% and the other $75 million note has a 12-year term and an interest rate of 4.95%. The notes were issued and funded after quarter-end. As a reminder, the company does not have any variable rate debt besides the revolver facilities and our near-term maturity schedule is light with only 115 million scheduled to mature through August of 2024.

Although capital markets are fluid and have risen in cost, our balance sheet remains flexible and strong with healthy financial metrics. Our debt-to-total market capitalization was 21.3%, unadjusted debt-to-EBITDA ratio is down to 4.88x, and our interest and fixed charge coverage ratio is at 8.9x.

Looking forward, FFO guidance for the fourth quarter of 2022 is estimated to be in the range of $1.73 to $1.77 per share and $6.91 to $6.95 for the year, a $0.03 per share increase over our prior guidance. The 2022 FFO per share midpoint represents a 13.8% increase over 2021.

In closing, we were pleased with our third quarter results. And as we have in both good and challenging times in the past, we were allowing our financial strength, the experience of our team, and the quality and location of our portfolio to lead us into the future.

Before I turn it back over to Marshall, I want to note that fortunately our Florida portfolio sustained minimum damage as the result of Hurricane Ian in September. With the aid of insurance proceeds, we will replace two older roofs on buildings in Fort Myers. We do not anticipate any meaningful financial impact to the operating portfolio because of the storm.

Now, Marshall will make final comments.

Marshall Loeb

Thanks, Brent. I'm proud of the results our team created year-to-date and the position it leaves us in for the balance. Internally, operations remain historically strong as our results indicate. That said, the capital markets and overall environment are volatile. While never fun to live through a couple of thoughts that may prove helpful.

First, our team has worked together through several downturns and forecast downturns before. Our strategy shifts, but it's not uncharted waters. Secondly, the industrial market has been red hot the past few years. So, some level of market concern we view longer-term is healthy for sustained positive environment.

Meanwhile, our buildings are as full as they've ever been and rents are rising throughout our portfolio. We will work to keep occupancy high, continue pushing rents, and listen to tenants and prospects to accommodate their demand in the market as we've always done in good and bad markets.

And longer-term, I remain excited for EastGroup’s future. There's several long-term positive secular trends occurring within last mile, Shallow Bay distribution space and Sunbelt markets that will play out over years such as population shifts, evolving logistics change etcetera, which we are well-positioned for.

And we'll now like to open up the call to take your questions.

Question-and-Answer Session

Operator

Thank you, Mr. Marshall Loeb, President and CEO. [Operator Instructions] Our first question comes from Craig Mailman from Citi. Please go ahead Craig.

Craig Mailman

I know Brent, you said there is no real impact in the hurricane, but anything on just development timelines or impact on fourth quarter recognition that we should be aware of?

Marshall Loeb

Hey, Craig, a little bit of – this is Marshall. I'll comment. Good morning and let Brent chime in. We were fortunate with Hurricane Ian and that we didn't have a lot of expense damage. In a couple of ways, we're going to work on that we're already – in next year's budget to begin with. It was more of a – there is some revenue loss in fourth quarter and that if you look at our development schedule and our supplemental, there is three buildings in Central Florida that are now scheduled to deliver in January.

There's two in Fort Myers that are 100% leased and one in Orlando and all those, we've had partial revenue budgeted or expecting it in fourth quarter and now we've pushed that back into early next year with Hurricane Ian and rightly so all the utility companies and the inspections are focused on residential first with commercial second. So, we've fallen back in queue and hopefully we can maybe get those online still this quarter, but we pulled those out of our budget. And so that was really the more impact to us as we were trying to deliver fully leased buildings and long-term, it's not a problem, but in fourth quarter, we lost a couple of cents or more that we're expecting to have through Hurricane Ian on timing.

Craig Mailman

Okay. That's helpful. So, no anticipated, kind of impact to the [indiscernible] rate. It's just a shift from 4Q to 1Q. That's how we should think about?

Marshall Loeb

Yes. The yields on the assets are fine and at least it's more timing and we'll have maybe some number. We had some cleanup and things will have 100,000 in expenses maybe in fourth quarter from Ian, but that's more gutters and cleanup and some of that will get capitalized as well. But in terms of run rate, short answer is, no.

Craig Mailman

Perfect. And then just moving to the development pipeline, this has been, sort of a big engine for you guys over the past couple of years. And I'm just, kind of curious as the – your yields have kind of stayed in that high 6% range, but now your cost of capital is, kind of creeping up narrowing that gap. So, I know that historically you guys have had, sort of a pull [mess] [ph] of the demand from the ground, but I mean, is there a thought process, but even if there is that pull from your local guys that maybe you do, kind of halt until yield reset higher to give you that more comfortable spread between financing and just returns?

Marshall Loeb

Good question and correct too. And that we're still thankfully seeing the pull in demand, but unfortunately, cost of equity and then cost of debt and even availability of debt have gotten tighter throughout this year. I would say early in the year in certain markets we probably would have developed and thankfully we didn't need to, but we would have gotten into the 5s or even low 5s maybe in certain markets where cap rates were in the 30s.

With cap rates moving and cost moving now, we're, you know as you said, what we're – what's in the pipeline? Is it a projected 6.8%? What we've come out of the pipeline is a 6.6? So, we're certainly looking harder at our development pipeline and where those returns and then pushing those a little bit higher. I would say, maybe the other good news thing we can say is, as we think about it is, we use current construction pricing and current rents in our pro forma. And rents have – so even with the, kind of shakiness or uncertainty this year, rents have continued to climb in our markets. And with the volatility, there’s so many of the local and regional merchant developers that have been pulled out of the market.

So, we're expecting a pretty steep decline in construction and then supply and probably starting second half of next year. So that that makes me hopeful. We're seeing a little bit of pickup in delivery time and I think construction pricing and deliveries, it's going to take some time to work through the system will come our way because I don’t think there have been a lot of construction companies that whether it was industrial construction or hotel or office or any other product types that's going to really slow down into 2023.

Craig Mailman

And just, you know, you make the point that price supply and now there's a lot of concerns about industrial supply, but it seems like you guys may pull back in the near term some of your competitors may pull back, the merchant builders are pulling back. And so, that just continues to put more upward pressure on market rents and the absence of the ability here in a lot of markets. I mean from your conversation with brokers and tenants in the market, do they acknowledge that rent growth has to possibly accelerate from here to make development [pencil] [ph] to get the availability that they may need to grow their supply chains? I know it's, sort of a circular kind of argument, but I'm just kind of curious if the market participants are starting to talk about this as a potential byproduct?

Marshall Loeb

I think and I'm following you up. I think people have certainly stepped back where you used to, you know, you, me and Brent could have had a site and once we got it zoned and entitled and got plans, we could have flipped it or if you're early in construction and all that, and we've really stepped down to the forwards and the acquisitions beginning in about May.

So, we've not actively been on those, but people weren't afraid of vacancy and we lost any number of those that we've been on because you can underwrite whatever rent you want when it gets delivered in 8 months to a year and that's come to a halt.

And so, I do think you're going to see, certainly we'll see less supply once things move on to this pipeline that's under construction, and I think because of people's cost and where land cost have gone, right, before things ground in the price discovery in second quarter, you'll see higher rents. But I guess that carry out of what makes me hesitant they're thinking that [indiscernible] is just where demand goes?

Right now, I think [tenants] [ph], look, we're not – as of today, we're about where we ended third quarter. We're still 99%, at least 98% occupied. Thankfully, we're stayed full, but every tenant has to be watching the news and reading the newspaper too. And so, everyone's got to be a little bit uncertain. And so, I just don't know if things get bad or how bad they get.

So, there may be – we're kind of keep waiting for the demand to slow down really since April and Amazon's announcement, but thankfully, we haven't kind of – each month, we kind of keep waiting for cracks in the system and haven't seen it, but with the lack of supply if demand can hang in there, it will be really a great market to be in 2024, I'm hopeful.

Craig Mailman

Great. Thanks. I'll [indiscernible]. Thanks, guys.

Marshall Loeb

Sure. Thank you.

Operator

[Operator Instructions] And our next question is coming from [indiscernible] from Bank of America. Please go ahead, [indiscernible].

Unidentified Analyst

[Technical Difficulty] some pipeline in markets like Phoenix and Dallas, are not directly competing with your assets, can you comment more specifically if you're seeing any change in appetite for location where tenants are basing their operations just given the tightness of the market? And are you seeing the move out further to the suburbs or relocate to other markets with better pricing?

Marshall Loeb

I guess maybe two type tenants, [indiscernible] good morning. This is Marshall. The larger box buildings, they'll usually stay in a market like Atlanta or Phoenix, they'll do a market wide search. And that's usually why they end up pretty far out in the suburbs. That's where the land is cheaper and they're more price sensitive. It ends up being a little more of a commodity business and so you can have [several guys] [ph] with big box deliveries and it's very price sensitive, astute tenants.

We like tenants that have to be ideally near their customers' in-fill and even though you see markets like Phoenix or Atlanta where people talk about supply, I think it maybe speaks to the difference of our products that we're 100% [lease thankful] [ph] in both of those markets. And where we do shift away from the City Center, maybe like, you know, I’ll stick with Phoenix and Atlanta where the population growth is.

So that – and we've spread out a little bit in Atlanta, but that golden triangle between say 10 o'clock and 2 o'clock in Atlanta. And in Phoenix, a lot of the new deliveries are out Southwest that's where the lines are less expensive and we've preferred the East Valley, the Phoenix and in [Australia] [ph], the Southeast Valley and that's where the residential growth is.

And those customers, certainly everybody's rent price sensitive, but they're looking more at hiring availability and the type of workforce you can hire and then really the transportation cost. And we've seen a number of tenants and I think in Dallas where we had [Train and Red Bull] [ph] recently both signed leases in two different parts of Dallas with us thankfully because they needed to be near their customers and because they didn't want their drivers tied up on the road because some of those cities have gotten so large you can spend all day even with a cheap location with drivers on the road and the transportation costs will offset the rent savings.

Unidentified Analyst

Okay. And for my second question, could we please discuss Houston? Your portfolio occupancy has been very strong in recent quarters, but it looks like some space was given back this quarter. Just given that this market represents 14% of leases expiring in 2023, can you update us on how demand – the demand pipeline is looking here?

Marshall Loeb

Yes, Houston, you’re right. We've got the fair amount of roll. By the time we finished the year, Kevin and the team there, that'll probably come down and that's about an average year for us at 14%. We're a little bit higher today than where we finished the third quarter in Houston, so that the team's already done a nice job backfilling some of that space. So, we've said it's been a – it's a market that's always made people nervous because of the volatility of oil prices, but we've historically [stayed] [ph], you know kind of 94% to 97% lease there.

So, I wouldn't call it Houston, but one of our top handful of strongest markets, but it's also a very stable market, but the fifth largest city in the country, things like that, much more diversified than I think people outside of Houston or outside of Texas view that market. So, we’re comfortable there. We've come down. We were north of 20% and Houston in terms of revenue now we're below 11%. The team does a good job of creating value via development and we've got a couple of Houston assets that we're looking to exit.

So, we'll keep building there, but probably develop a bit into high 6s ideally. And in the past, we've been able to sell things in the 4s, to even in the 5s now today, if we had to, but we'll keep kind of letting the rest of the portfolio grow, manage the size of our portfolio in Houston and feel pretty good that it's a solid stable market as much as any market can be given the national headlines today.

Unidentified Analyst

Thank you.

Marshall Loeb

You're welcome.

Operator

And our next question is coming from Alexander Goldfarb from Piper Sandler. Please go ahead, Alexander.

Alexander Goldfarb

Good morning, good morning down there. So, two questions. First, Marshall, just appreciate your comments on the overall demand north of 98% occupied, clearly incredible statistics. Others in REIT land are talking about slowdowns, but nothing is at all. I mean, I assume that you guys are looking carefully for cracks, but nothing is going on. So, as you look across the tenants, whether it's people who are homebuilder oriented or maybe tech oriented or some of the areas that may be impacted by higher rates or pullback in corporate spending? Are you not seeing any impact at all or is it that whatever area or industry has pulled back, it's been more than offset by other tenants?

Marshall Loeb

Good question and good morning. It's probably a little more of the latter and certainly when you mentioned homebuilding, we've been concerned about that and especially in the Sunbelt you’re in some markets where there's thankfully a lot of population movement to those markets, but that also leads to homebuilding activity. So, we're watching those. Although if you ask me to list the [homebuilder bankruptcies] [ph], we've had, I couldn't.

Earlier in the year, when Amazon made news, but we really had not pursued Amazon on new leases for a number of quarters. FedEx has been in the news of late and both of those are Top 10 customers that neither one, but to combine there are about 3% of our revenues. So, we've been able to offset. If Amazon slows down in FedEx, it's not that it's a huge portion of our business, there's other tenants taking that space.

Our bad debt, this quarter was a tenant whose, it's in the pharmaceutical business. They were getting too much into their business. They lost the lawsuit and immediately filed Chapter 11. So that was another. One of the hits to our fourth quarter is a tenant that filed Chapter 11, we're working to either collect the rent or get that, that's about a little bit more north of a penny of fourth quarter loss.

The good news is, if we do get the space back where they rent fit, it's about 50% below current market rents. So, we'll be able to push the rents there, hopefully pretty handily, but that was literally 95% of our bad debt and third quarter was a tenant and they lost a lawsuit to a competitor and fled Chapter 11. But so, we're watching for it and trying to do a change to it. And I would say, our bad debt historically has run about maybe 20 basis points to 25 basis points revenue.

So, I think that seems like a concern we hear from the street as smaller spaces must mean smaller tenants, but I think our bad debt and our history doesn't prove that out. And this quarter it was [8 tenant] and we'll see the 1,600 tenants are [indiscernible] that are, because I mentioned in the call, our Top 10 tenants are under 9% of our revenue and most of those are in multiple, [while] [ph] several of those multiple locations. So, if we did, then we're not aware of anything did lose a FedEx or an Amazon or consolidated electric, we wouldn't lose. We wouldn't lose them in every location. You might lose them in a location.

Alexander Goldfarb

Okay. And the second question is, you mentioned on – in response to the last question on cap rates and you mentioned maybe Houston is now, sort of in the 5s. Can you just talk overall about cap rates? I mean, you bought a bunch of land in the third quarter – development yields have come down, it sounds like a little bit, but curious to hear what's going on the cap rate side of the equation.

Marshall Loeb

Yes. We're watching it and I wouldn't call Houston in the 5s. Right now, we're still, it's been the several months of price discovery and maybe with a bigger preference, we step back from actively bidding on acquisitions and even value add acquisitions in May. So, what – most of what I know is anecdotal. We talk to brokers often, but we're not in the bidding process. Where cap rates have moved the most material is at single tenant long-term lease. It makes sense. It's more like a bond.

So, those cap rates have moved up. If it's multi-tenant, so it's a multi-tenant project with shorter-term leases and odds are those are going to be below market given where markets have been the last couple of years. Those cap rates have been stickier. They've moved up, but they've held in there. We've got a few smaller assets on the market. There's definitely fewer buyers out there. There's price discovery. And what we're hearing is there's a lot of institutional demand for industrial product. It's attractive compared to the other property flavors at long-term for a number of reasons. And it's really where things just aren't trading as much. There's a lack of debt.

So there's very few portfolios on the market and nothing is trading. And I think with the lack of debt and equity, it's going to stay that way for a little bit of time. And so that's what's made us be very cautious and careful on our development although still in the high 6s and the way we look at it, especially we have a park that we need to get each one justify the next development based on its return, but we're – as you mentioned, 99% leased as a company and 100% leased and probably a good half dozen of our active development markets.

So, if an existing tenant needs space, we've always said someone will deliver in that space and I'd rather move them within our park and we can backfill their existing space with the markets this tight at a higher rent than we're collecting today. So, we're certainly more – we were careful, I'd like to think earlier in the year and we're even more careful right now. Just watching for slowdown, but we're watching for, but really have a knock on wood been impacted through October 25.

Alexander Goldfarb

Thank you.

Marshall Loeb

Sure.

Operator

Our next question is coming from John Nickodemus from BTIG. Please go ahead, John.

John Nickodemus

Hello, thank you and good morning, Marshall and Brent. Just a quick question regarding, sort of return hurdles you're looking at when making acquisitions or any of your developments. Just was curious if there are any changes for your team there, given the current market conditions and you said, you haven't been impacted as much, but just anything you're monitoring there, any changes you've made, sort of within the past few months?

Marshall Loeb

I would think – good question, and again, we probably earlier in the year if you had called us on a new development, probably the right market and the right – more importantly right submarket, we would have looked at the development in the 5s, just given the long-term growth prospects of that, and now we would probably move that well into the 6s because our cost of capital has gone up.

We never have needed to go there on our development pipeline, but a couple of value-adds. We were – and again, we – that's where we avoid the instruction risk that take on the leasing risk. We've looked at those at the 5s and even I think we did one last year in California and kind of in the fours, we will probably look more carefully at least we'll stop the value adds altogether and probably move to own development, kind of hurdle up by 7,500 basis points just because our own capital is a little more precious given where pricing is.

We want to keep some dry powder because we think there's going to be some opportunities as these small local and regional developers, I don’t think that there are a lot of distress out there, and some of it may come via land and we've been able to acquire a land site a couple that we're working on that one report is one we haven't where it was the person that had it under contract was unable to perform and we're able to get repricing on it.

So, we're trying to be cautious with our capital and we have moved our development yields up over the course of this year and we'll just see where, you know I don't think interest rates are coming down unfortunately with the Fed and everything else anytime soon. And I hope I'm probably worried more about our own existing tenants and the impact on them as this plays out too.

John Nickodemus

Great. Thanks so much, Marshall. That is super helpful. And then just second one for me. I know we've seen, sort of more macro headlines about a shift from port activity, sort of from the West Coast over to the East Coast. Houston would be a notable example of that. I'll just do it several different reasons, but just curious if this is something that you've seen impacting your business? And if so, how – or your business and your tenants, I guess?

Marshall Loeb

We haven't – it's interesting to watch and we haven’t really and I think there is a good industrial development or ownership play at the [Port] [ph]. And I hear – as we kind of like here we read about it, I hear the Port of Savannah's, Georgia has done very well and certainly the Port of Houston and we probably benefit indirectly, but we've avoided the port, really directly port related buildings in terms of development and acquisitions. And my fear it's just not a world we've played in.

If you get more into logistics and how that works and I guess, personally, I remember watching a video of how the Port of Jacksonville had really improved their port and I'm getting excited and then it made us probably one of the video just like this for Virginia Beach and Savannah and Miami and always assume there's someone in Bentonville, Arkansas or somewhere like that deciding where the best place to ship their goods is.

So, I think in terms of, if I leave a [indiscernible] port submarkets where we do think we'll benefit and we're seeing that benefit is more onshoring or nearshoring of manufacturing. And South San Diego, we benefited there. It's not really ports, but it might be port of entry with our Amazon delivery earlier this year. We bought several buildings that were 50% leased from an institution at the end of last year. El Paso has been a good market, Phoenix, Tucson.

If I think about ports, we're probably along the border and the shift to from manufacturing, especially in technology, we're benefiting with Tesla coming to Alstom and [Samsung] [ph] and things like that. We're bullish on Alstom long-term and we've seen not so much the manufacturers, but the suppliers both in [Austin] [ph] and San Antonio, we've benefitted from that. So, I'm pulling ports to mean – ports of entry not sea ports, but hopefully that's helpful.

John Nickodemus

No, that's really helpful, Marshall. Thanks so much.

Marshall Loeb

You're welcome.

Operator

And our next question is coming from Jason Belcher from Wells Fargo. Jason, please go ahead.

Jason Belcher

Hi, good morning. Just wanted to ask about the Horizon West 2 and 3 developments. I noticed you transferred those into the operating portfolio in Q3 upon reaching the one-year post completion threshold ahead of that otherwise 90% occupancy threshold trigger, but all the other developments went into the portfolio in Q3 are fully leased. Just wondering if you could give us an update on the Horizon West developments and maybe comment on any drags on occupancy there that you can share?

Marshall Loeb

Yes. We're happy with Orlando and it's a strong market there. We like the park. It's about 50,000 feet and you’re right, I guess, I usually have conflicted emotions that we've transferred 11 buildings in this year and some of those were fully leased and Horizon 2 and 3’s really missed it. It's more timing. We'll be fine on Horizon West. Horizon West 4 is a big box building. That's one that we'll deliver in January. That one's a 100% leased, so that Park is doing well. And as long as the demands there continue our development, but you're right, that's one.

And I guess bigger picture as they conflicted, I think too, if we're hitting on 10 out of 11 and the profits are there and again now is a little more uncertain timing, part of me says, given the profit spreads should we be hitting on 12 or 16 because you may be better off, and look, it may take us an extra quarter to lease it. But at the end of the day, that may be a 10 basis point return difference on a grid asset.

So, we're comfortable with Horizon West 2 and 3, comfortable with the Park in Orlando. This is one that took a little longer to lease up than some of the others in that Park have.

Jason Belcher

Understood. Thank you. And then I guess for my second one, I know you're not given guidance yet for 2023, but just given the rising rate environment and its impact on the investment sales market, maybe if you could just talk maybe a big picture how you're thinking about acquisitions versus development going forward to what extent do you anticipate the pipeline for acquisitions at least at attractive pricing could expand over the next year?

Marshall Loeb

Last several months in a handful plus we've not been active in the acquisition market. That said, I think it would be – if we’ve done something, that would need to be a unique situation, a building around the corner, in a submarket we're in, next door or something like that. And at some point, if the market stays this, kind of volatile if we could find the right acquisition and really that delta. So, if we're still developing to call it a 6, 8, and you could get a unique acquisition to step down on timing we might, but it would probably need to be a unique acquisition for a core acquisition.

That said, we've stepped on a couple of times on land pricing already where it's been land. We really like where one was a local developer, was running out of time, couldn't raise the capital. We stepped in and they made some money, but not nearly that they were hoping to and we've been renegotiating a number of our land acquisitions. And we're careful on land. I would say, on the land acquisitions, we dropped some peripheral land sites. There's some – we dropped the more expensive ones.

We dropped the peripheral land sites, but if we can find a good infill landsite that we really like, I'd rather not carry it, but if we had it and it's a mile downturn, I think that's the one part that's really been our bottleneck the last few years is finding good land sites. And I think there'll be what we're hearing from brokers any number that where the contracts have been extended and the contracts will be dropped and we've dropped a few of them ourselves probably.

It’s always a little bit painful, but they're still out there and we can always circle back to them at the right time, hopefully.

Jason Belcher

Thanks very much.

Marshall Loeb

Sure. You’re welcome.

Operator

Our next question comes from Dave Rodgers from Baird. Please go ahead, Dave.

Nick Yulico

Hey, guys. It's Nick on for Dave. I kind of wanted to touch on thing from the prepared remarks on the widespread rent growth across the nation. Maybe what are some of the markets that you're kind of surprised with the rent growth numbers, just looking across the portfolio?

Marshall Loeb

A good question, I guess surprised that all goes back to what you're – to me for – I'm kind of looking at ours and I like year-to-date because in any – that our size portfolio in any quarter, you could get an odd mix. But Tampa, Florida all-in-all has been a strong market, north of 40%, Tampa 50%. When I look kind of throughout our portfolio, I knew Las Vegas has been a strong market and I'm looking at GAAP numbers at 66%, I think they were 39% for the quarter, 36% for the year is a really strong number for us, and really all of those markets I think we've been happy with Austin.

I guess I'm not shocked at north of 50%. As I mentioned earlier, we like Austin, for it’s the capital, it is the University Town. There is some [topography] [ph] issues. There's technology and you really can't build on the west side of Austin because of the [indiscernible] and the topography. So, we think that's going to be a really strong market. So, thankfully there's any number of them.

Last year, we had – we were in the low 30s on a GAAP basis, which was a record year for us, but we had some large leases in California roll that really helped us get there. This year, we haven't had the benefit of that, but yet we've had a better year. So, that's what fills to me more lasting and probably more indicative of the market of just where we've said before, I think people, [indiscernible] gets the lack of land and maybe the coastal cities, but cities like Dallas where there's supply imbalance, but reading the CBRE reports the new supply in Dallas, it's a big number at 65 million square feet, but it's 73% of that is in what they've classified as outlier markets where we're not.

So, those are the things that surprise me or you realize just how little land there is as big as Dallas is, as big as Phoenix, as big as Atlanta is where you look at where the new supply is. So, if you can find those sites, we're happy with where rent growth has been. It may, you know who knows what the economy, it may slow down a little bit, but I'm grateful that we have the embedded rent growth where we've been. I was just reading where Atlanta rents are up 18% year-over-year.

So, that slows or even pauses, we've got some room to continue pushing rents until hopefully we get to the other side of whatever. If we do go into recession, we can get to the other side of that and still show growth through pushing rents.

Nick Yulico

That's helpful, Marshall. And then maybe a question for Brent. With the current stock price you guys said you're probably not going to be issuing equity, but you did mention incremental debt and kind of flexing the balance sheet. So, for like leverage parameters like, where you flexible taking leverage at this point? Just looking at development opportunities and future acquisitions?

Brent Wood

Yes. Good morning, Dave. We are flexible in that. We've obviously put ourselves in a position to be able to add debt. I don’t think going back six months ago, we realized debt would double in cost over the course of the year, which has obviously caused a problem, but we were really proactive intentionally early in the year. We've issued 525 million of debt so far and like say, we were intentionally proactive in the first half of the year with expecting rising rates.

So, we'd be able to do that at a [3.8] [ph]. So, we'd be able to provide a lot of runway for ourselves. We're very low draw on a revolver currently. And so, we're in good position to go out into next year and as Marshall has been saying from both the leasing standpoint and the capital access standpoint, we'll just have to see how that plays out, but we're also looking at less expensive options that we can do.

We're pursuing maybe exercising a portion of our accordion on the revolver. Our revolver total capacities is [425] [ph], which is relatively small given our size and we benefited from that because it's been low cost to us for a long, long time, but maybe expand that just to give us a little more liquidity and flexibility and timing a few holes in our laddering that would be shorter-term in nature. And so, trying to pull all the levers early that we can that give us the best cost if you will or at least expensive access to capital and we're in a good position to get out into next year and [indiscernible] plays out. The price come back a little bit, low 150s.

You look at NAVs and that ranges from [136 to 216] [ph]. So, I think it's safe to say consensus NAV right now is an average of I'm not sures and I don't knows and we don't know either. And so, we haven’t totally given up the idea and we're not dialing into anything we're forecasting, but we haven't given up on the idea of accessing equity potentially at some point over into next year if the Fed could say they're backing off and if the company is still doing strong and depending where the share price is, how much cap rates move where people think NAV is at the moment.

So, we're in a good position as we always typically are. We're in a good position to be able to be very measured in what we do and so that's what we'll do. We're in a good spot going into next year. I'd also point out on our development pipeline sheet, you see 600 million of total development, a lot of projects there, but there's only 190 million of spend left to put all of that 600 million, 600 million at cost. It's more – the value of that's probably closer to [a billion dollars] [ph], but we only got to spend $190 million left to unlock that.

So, we're in a good position to take care of that and again, as we get out of the 2023, we'll just see what the market is dictating to us and we won't fight it. We'll respond to it as best we can.

Nick Yulico

All helpful. Thanks guys.

Operator

We now have a question from Bill Crow from Raymond James. Please go ahead, Bill.

Bill Crow

Yes, thanks. Good morning, Marshall and everybody. Marshal as you think about what's happened to rent growth over the last, I don't know, 10 years and you think about the mark to market that you're reporting this year and I assume next year. At what point do we hit really tough comps? In other words, when did the real acceleration take place? Was that kind of a 2018 event, 2017 event, I'm just trying to think your average 6 or 7 year lease term? When do we start to see those more difficult comparisons?

Marshall Loeb

Good question and I'm thinking as I'm answering your question. I believe this is our, on a maybe off-year or 8th year of double-digit increases. So, usually we're four or five year leases and that – and again, it hasn't always been in the 30s. It started out in the low-teens, the high-teens and up. That said, and this is anecdotal. One of the – I mentioned that spaces we released in California last year, for an example, we had about a two-thirds rent increase on a big space. This was down near the port.

Last week, I was in California with a couple of our team and they were over some of that space and they think our rents are 50% below market. So, even though we raised rents by two-thirds, we're wishing we would find a one-year lease, not a five-year lease because the rent in the markets doubled since we signed it.

So, I've been – I guess I'd say personally and maybe this is a Brent not based been in the industrial market, probably combine more years and we really want to sit down and add up. But I never expected industrial rents to do what they've done the last handful of years, we'll start to run into higher comps, but maybe just given that how people deliver and the demand for I want to order – whether it's ordering online or in by phone, however, and I want it delivered more quickly or Sunbelt cities have grown so much.

Traffic has gotten so bad that you need multiple sites in different parts of the city. And thankfully our rents are just a low part of the cost structure, makes me feel pretty good. I've given a feel for our tenants given where their employee wages have gone the last few years and where transportation costs are, it feels like it gives us room to push rents. and we can't – look, we'll push rents, but we can't set market rents.

We're following where the market takes us, but it's been pretty broad spread. If you have well located, well designed product, it's – there's a million raised and I think there's 1,600 ways to use our buildings as our tenants show us. I feel pretty good going forward about our ability to produce rent growth even if the market needs to take a minute and pause because of the economy. So, but we're probably already into some of those hard comps to a degree and what we're eight years under double-digit rent growth.

Brent Wood

Yes. I would just add to that, Bill. I think if you figure any given market depending where you are is increasing year-over-year 5% to 8% over the course of a five-year lease, I mean you're looking at 25% to 40%. So, I don’t – from a comparable standpoint, I don't know like coming out of the great recession where you might have had some of those comparables. If the market can maintain or it has maintained that sort of growth, I don't know that there was anything that was quite left behind or that was pre a certain hard date like it wasn't a great recession. But I think it really comes down to demand in the health of the market, whether or not it can stay in that.

I think the comps as Marshall was saying, it kind of just continued to kind of step on each other moving up and up and not necessarily not having a spot to look back to. And maybe if supply comes down next year, as Marshall alluded to, it may be some of the developers becoming more an ability to access capital and slow that down. And if demand can hang in there, then hopefully those get some decent drivers to help rents hang in there. So, if demand hangs in, I think the comps will be there.

Bill Crow

No, I appreciate it. I want to ask a follow-up question. A two-parter, hopefully short answer is here, don't use up too much time, but on the construction environment, any change and I may address this a little bit on the horizon lease up, but any change in the lease up duration on average of your new development pipeline? And then second one, I'm assuming the costs overall to build are at least starting to come down if they haven't already come down when you think about land and you think about some of the construction materials. How far are we off of peak if we are off of peak pricing? Thanks.

Marshall Loeb

No, we’ll answer in the reverse order. I think, we're maybe slightly off of peak. We're seeing faster delivery times a little bit. So, that's been – that's the good news and that'll help thin out the supply for – that means it just takes longer for everybody to finish construction. So, the supply numbers have gone up just because of the gestation period to deliver [buildings] [ph]. And we've seen some pricing come down. There's been some offsets, what I mean, was roofing materials and this were down. The concrete prices are up. So, we're maybe 5%, no more than 10% off the peak pricing.

I think that'll take another quarter or two to really start to play out hopefully. And we still feel pretty good our demand for our development, yes, we, and to me, we missed a spot on Horizon West, and it was a good question, but that's really one tenant. Look, at the 50,000 feet, we would have been 11 for 11. So, I wouldn't – I would hesitate to take that as – I would take our 99% leased as a better read on market, industrial, and I know I'm selling here, but that's over a larger pool of assets than one building where we got 50,000 feet.

So, we feel still pretty good. We leased over 0.5 million square feet this quarter in our development pipeline. We've got some other pre-leasing. I think as tight as the markets are, it will be interesting. I think the push, pull will be, what we're hearing is, there's really the lack of available space, had dinner with a [tenant rep broker] [ph], the other night and they were complaining how their business isn't fun because there's not many options to show their tenants and everything they show them there's competition for and things like that.

And then the other flipside of that is every tenant is taking a little bit longer to make a decision. What we're hearing is places are still getting signed, but the decision-making probably rightly so given the economic climate taking a little bit longer. So, we’ll keep watching the development pipeline pretty closely. We think it's been a great way to create earnings, create NAV over the years for us, and we'll trying to – we'll let the market tell us where we need to take that next year.

We've certainly built more buildings the last couple of years than I would have estimated to begin the year and if the market [indiscernible] will slow down our development pipeline. And as we mentioned, we've already, kind of push the yields we need to give in where our cost of capital has moved during the year.

Bill Crow

Great. Thank you for the time.

Marshall Loeb

Sure. You're welcome. Thanks, Bill.

Operator

We have a question from Ki Bin Kim from Truist. Please go ahead, Ki.

Ki Bin Kim

Thank you. Good morning.

Marshall Loeb

Good morning.

Ki Bin Kim

Marshall, I wanted to go back to your comments about smaller spaces, perhaps not equating to higher risk or more fallout in a recession. I was wondering if you can just provide more color around that. And tied to that, how has your portfolio, I'm sure it's changed over the years, how has that portfolio handled a moderate recession?

Marshall Loeb

Yes. I guess going back, we've been – good question, couple of names and we look at our top 10 tenants and some of those names where I was really looking at some of the leases we've signed this quarter where I think people think of smaller spaces Ki Bin, Brent, and Marshall, we just left our garage and opened a space, but we, you know within our development pipeline, I mentioned Train and Red Bull, HDC supply, Frito Lay, Walmart, those were all in the last month to two of some of the leases.

We historically have quoted bad debt. I would have probably told you two or three years ago 40 basis points of revenue, and that's really moved down in the last, call it, 10 years and down to kind of 20 basis points. So, some of that with the market this time where tenants are in trouble, we can backfill their space at a higher rent and get the term fees is what our team has done a good job.

If I go all the way back to I'm kind of looking at our bad debt numbers and 2008, 2009, we were probably averaged about 100 basis points. And then since then, it wouldn't have dropped dramatically. So, by the great financial crisis, we were a much different company in terms of size and probably [tenancy too] [ph]. We've weeded out a lot of our rent deferral customers during the COVID timeline, we were able to replace, thankfully in a strong market that's a great time to improve their credit.

So, it’s a peak. And then in 2020 during COVID, I guess, looking at that, we were about 75 basis points of bad debt, but last year, we had negative bad debt, so that we recovered a lot of the tenants we've reserved, and most of that like this quarter, the bad debt was [8 tenant] [ph] and even when it was a straight line write-off not a cash, not back rents that we had to write-off. So, that's a lot of stats in a short period of time, but I hope that's helpful.

Ki Bin Kim

Yes. And if I think about the GSE, I mean, you're not alone in this, but you guys did lose occupancy, so maybe not bad debt, but you have a lot of, I mean, I'll put in quotes a lot, right? [About relative] [ph], but you had tenants not renewed and your occupancy went down several hundred basis points. So, I'm just, I guess, [indiscernible] portfolio composition today versus maybe the GFC? Is there something structurally different about it? Do you have less, like, housing related tenants? Any kind of color you could provide around that?

Marshall Loeb

I think and Brent chime in, what I would say is, some of our markets are very that much more in-fill. That much bigger cities, Dallas, Phoenix, Orlando. We went to those markets that were growing and 14, 15 years later, they're not much larger. So that – and I think we'll do a little better. We've got a little more – there's much more to the city than there was. And I know we talked about Fort Myers and someone said in the last downturn, homebuilding was 105% of the GDP and Fort Myers and areas like that and it's still a fast growth area.

So, I feel better about that the [CDs we're in] [ph]. Back then, we were more concentrated in certain markets that were more we spent a lot of time the last 10, 12 years spreading out our geographic diversity. So, I think that, the tenant diversity and the geographic diversity and I was talking to one of our peers the other day and their comment was during the GFC occupancy dropped, I believe it was maybe 400, 425 basis points and one difference today, one if we go into something that severe, so this was [indiscernible].

The good news is, market wide occupancy, we're probably 500, 600 basis points higher depending which market we pick, the markets are that much more full than they were heading into the financial crisis. So, this one feels more government induced than homebuilding induced and things like that in terms of just raising interest rates to find out – to put inflation in line. And I'm glad that whether our portfolio is at 99% and our markets are 95% to 99% leased as well.

I feel a little better that it may not be as severe as the financial crisis and I think surprise, [indiscernible] but that much more institutionally owned in all of these markets. So, I think even if it's a local developer, they've got an institutional financial partner. So, they've probably already stopped merchant developing or so they have stopped in the forwards and things like that. I think supply will [shut off] [ph] faster than it probably did in say [7 or 8] [ph].

Ki Bin Kim

Okay. Thank you, Marshall.

Marshall Loeb

Sure.

Operator

Our next question comes from Michael Carroll from RBC Capital Markets. Please go ahead, Michael.

Michael Carroll

Yes, thanks. Marshall, I wanted to touch on your current market rents today. Given that your portfolio is a little unique with the infill shallow bay type exposure, I mean, how different is rent growth within your portfolio versus the rest of the market? I know you said earlier that [indiscernible] rent growth was up, I think it was 18%. What was your portfolio's market rent up compared that in Atlanta compared to that 18% number that you highlighted?

Marshall Loeb

Good morning, and I'm just looking back. 18% was what I was quoting from CBRE and I honestly didn't rehearse this. We were 25% just over that cash in Atlanta year to date, a little over 31% gap. And in Atlanta, maybe it helps to in that same CBRE piece, the market vacancy is 4.2% and shallow base 3.4%. So, typically where we say there's – it's helped that our peers are larger and mostly they're private.

It's the pension fund adviser. They've got so much capital put out and it's easier to build because of the land availability and the zoning on the perimeter of the city then in an in-fill site perhaps where the big box is the average building, for example, in Atlanta is about 325,000 square feet. And so, most of ours are maybe 90 to 150.

So, it's a little bit different product being delivered. And I think that helps us avoid being commodity and hopefully allows us to push rents. We've seen even smaller spaces, one of our private peers was somewhat – basically the demand they're seeing about 15,000 to 25,000 foot spaces. Our average tenant size is in the low 30, so a little bigger than that, but we've seen some doubling of rents, that's as much a function of just to build those spaces out the tenant improvement allowance given construction costs, you need to have rents like that.

No one can afford to build out. Building out a 20,000 foot space by the time you get the office and the restrooms and the warehouse wiring gets awfully expensive. So, that should help us to push rents and it steers a lot of our peers away from it because it's just as much work probably to build an [80] [ph], almost to build a 80,000, 90,000 foot building as it is a 600,000 foot building on the edge of time, probably harder to go through designing.

Michael Carroll

Okay, great. Thanks Marshall. And then, you mentioned earlier in your prepared remarks that your underwriting for development has changed. I think you touched on a longer timeframe. Did I hear that correctly? And were you referring to the construction time frame or the lease up of developments that you've been changing?

Marshall Loeb

It's really more and I apologize if I misspoke, it's that – maybe where we've looked it’s the yield, kind of the yield hurdle for new developments where we would have worked in the 5s maybe in the right market, right submarket. Now, we're in the 6s. I think our lease up of development will still pull buildings into the portfolio at the earlier of 90% occupancy or a year pass certification of occupancy.

And thankfully, those have been rolling in. It's been the latter, hey, we're 100% leased for moving them into portfolio all, but the one we stubbed our [indiscernible] on a little bit first quarter. So, no changes other than given our cost of capital and the market cap rates. Even though it's still pretty fuzzy where cap rates are, where they're going to settle ultimately, we push the [indiscernible] requirements up, and that's, but we still under our current market rents and current construction costs and all the things like that that we've historically done.

Michael Carroll

Okay, great. Thanks.

Marshall Loeb

You're welcome.

Operator

We now have a follow-up question from Craig Mailman from Citi. Please go ahead.

Craig Mailman

Hi, guys. Thanks for taking the question. Just quickly, Marshall, I apologize if I didn't hear this. Did you provide kind of an embedded market for the portfolio either for the 2023 low or just kind of in general or have one that you could provide?

Marshall Loeb

Yes, I know a couple of our peers do that and we've looked at it. We just haven't done that great. And in portfolio, we've always said, we haven't done it for 2023, so short answer is no. We haven't done that. We've always hesitated taking the tariff at least as a role for three, four, five years and market rents changed in so much. So, it’s something we've discussed and it's not something we've – I don't see the market changing much from where it is today unless demand really unwinds, but we've not formally disclosed a mark-to-market.

Craig Mailman

Okay. And then just second, I know we talked a little bit about the development pipeline and maybe some slowing here, just Brent, as you look out at kind of what's delivering, what maybe starting, I know maybe early for that in the budgeting process, but do you feel like cap interest burn off is going to be material at any point or because things are coming on so well leased from an earnings impact. It's not something to be that concerned about yet.

Brent Wood

It would be, it really would be – something would be that concerned about, Craig, unless if the market dictated such either the slowdown leasing or excess cost of capital or whatever. If we – whatever our development starts might be this year, I think we're projecting 375, if that number were to come down next year as it – that would have an impact on capitalized costs, obviously, you'd be doing it on a smaller number, whether it's cap interest or the capitalized cost that offset overhead in G&A.

So, at this point, it doesn't feel that it would be that way, but that would be the thing to watch. Craig, it would be kind of a proportionate and we disclosed those capitalized numbers in the tables, but if that number were to be 275 or whatever the number is versus 375, then those capitalized numbers would come down as well. They would move in a proportional sort of movement. So that would be something to keep an eye on.

Certainly that sort of ancillary side note, I mean, really what's going to drive our decision making is strength of the market and access to capital. And like I say, we're in a good position enter the year in 2023, kind of continuing where we are, but it's just something we'll have to closely monitor both from a continue to hopefully strength and leasing and then also from what's our access to capital what does that cost? And so, we'll make those decisions as we get there, but if it were to be lower and wind up being lower, then that would have some bottom line impact certainly, but like you say, a little too early to tell at this point where that will shake out.

Craig Mailman

Great. Thank you.

Operator

We have a question from Ronald Kamdem from Morgan Stanley. Please go ahead, Ronald.

Unidentified Analyst

Hey, it's [Damian] [ph] calling in for Ron. Just wanted to follow-up on some of the earlier cost of capital questions. Understand that you guys and get some debt offerings more recently. I think those were priced in the second quarter of the year. So, just if you were to offer the same type of debt today, where would that be relative to the under 5% cost on a blended basis previously?

Marshall Loeb

Yes, it would certainly be higher. I mean obviously cost moves. And you're right, like I said, we intentionally have been pretty, I guess, I would say, aggressive in the early part of the year with anticipation of higher movement in cap rates and certainly we're right in that, but if we were to look at long-term debt today for us.

And again, I'm talking more estimated because we haven't been in the market recently and it can move – it moved while we were on the phone call today. I mean, that's how much it can move. But I would say it would probably be somewhere around that [6 area] [ph] for us on long-term. That's like 10-year plus fixed rate debt.

As I mentioned earlier, we're looking at some short-term options that give us flexibility, as I mentioned, maybe exercising a portion of the accordion to expand our revolver balance, looking at a few holes in a laddering where maybe it would be shorter-term debt, maybe priced a little more favorably. So, we still got a few other levers that we're looking to pull and process, but if you're looking at longer-term debt, I mean, it certainly has moved up and continues to move up. And as we've been talking about this morning, it's one of the factors as we get out into next year that we're going to have to monitor in relation to cost of it, relative to what we can invested at.

Unidentified Analyst

That makes sense. And then just on internal growth, I think some of your peers have talked about, you know there's a big spread between leasing spreads on commenced leases versus signed leases, are you guys seeing that within your own portfolio as well, on a cash basis and on a GAAP basis?

Marshall Loeb

I'm not sure I'll follow that. I mean our numbers have been pretty consistent for a number of quarters now in terms of cash rents being strong and still slightly inclining or increasing and then GAAP numbers increasing. From signing to commencement generally, for development there could be a few months and for a vacant space, it's generally pretty quick turns. I don't know that we've seen any big change from signing to commencement. I'm not sure if I totally follow the question.

Unidentified Analyst

Yeah [that answered] [ph] my question. Yes, just if there was kind of a big jump in market rental rates, you know over the past couple of months given there is, kind of like you said 3 to 6 months lag between when you commence on a rent versus when you sign the rent. I think that's…

Marshall Loeb

Some of our peers historically have waited till they've delivered buildings to really start leasing. And look, that's paid off the last few years. We'd like to – really we want to run out of land in our park and things like that. So, we've been maybe a little more chicken. Usually, if the tenant's ready – if things get bad, they turn bad quickly. So, if somebody's ready to sign a lease and we're a long-term owner, we'll negotiate the rent hard, but fairly, but we'll go ahead and sign a lease when the tenants are ready to lease or when they're ready to renew and do it almost as dollar cost averaging.

If we've got 3 million square feet or 4 million in a market, we're going to have some expire at a good time and some at a bad time in the market. So, we'll go ahead, but I agree with Brent and your comment earlier. Thankfully, they've been moving up the last several years and continue to have that upward pressure today.

Unidentified Analyst

Great. Thank you, guys.

Marshall Loeb

Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Loeb for any closing remarks.

Marshall Loeb

Thanks everyone for your time. If there's any questions or follow-up questions, certainly Brent, Staci Tyler, and myself for available. And if not, we look forward to seeing an awful lot of you at nearly in just a couple of weeks in San Francisco. Thanks for everyone's time.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.