ARE's Q2 FFO Beats Estimates on Leasing Momentum, Rental Rates Improve

ARE's Leasing Volume Accelerates in Q2

Alexandria executed leases covering approximately 1 million rentable square feet (RSF), up 60% from 647,356 square feet in the preceding quarter. The total also exceeded the second-quarter 2025 through first-quarter 2026 quarterly average of 952,365 RSF by roughly 87,000 RSF.

Lease renewals and re-leasing accounted for 640,998 square feet. Leasing of previously vacant space totaled 329,148 square feet, while development and redevelopment leasing contributed 68,771 square feet. Existing tenants generated 68% of the reported quarter's leasing activity.

ARE's Rental Rates Show Improvement

Rental rates on lease renewals and re-leasing of space declined 0.7% during the second quarter, marking a sharp improvement from the 15% decrease recorded in the first quarter of 2026. On a cash basis, rental rates fell 4.3% compared with a 15.8% decline in the prior quarter.

The tenant base continued to support cash-flow visibility. Investment-grade or publicly traded large-cap tenants generated 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 Remains Under Pressure

Occupancy of operating properties was 86.9% as of June 30, 2026, down from 87.7% at the end of March 2026. The decline reflected previously disclosed lease expirations and the reclassification of space at 3000 Minuteman Road from redevelopment to operating.

Executed leases covering 1.4 million RSF have not yet commenced. Including this space, occupancy would have been 90.9%. These leases are expected to generate approximately $69 million in annual rental revenues, with a weighted-average future occupancy date of November 2026.

ARE's Same-Property NOI Declines

Same-property net operating income (NOI) decreased 10.6% year over year, while same-property NOI on cash-basis declined 8.6%. The decline was due to lower occupancy, primarily reflecting previously disclosed lease expirations with expected downtime.

The company’s operating margin was 69%, while the adjusted EBITDA margin came in at 67%. Interest expense increased 16.4% year over year to $64.3 million, reflecting the impact of debt issued at higher rates and the repayment or repurchase of lower-cost borrowings.

ARE Advances Its Development Pipeline

During the second quarter, Alexandria placed into service a 426,927-RSF development project occupied by Bristol Myers Squibb in San Diego. The property generated incremental annual NOI of $57 million.

The company expects projects scheduled for delivery in the second half of 2026 to contribute approximately $42 million in incremental annual NOI.

ARE Maintains Strong Liquidity

Alexandria ended the second quarter with $3.60 billion of liquidity and a weighted-average remaining debt term of 9.7 years. Only 6% of total debt matures through 2028. Net debt and preferred stock to adjusted EBITDA was 7.0X, while fixed-charge coverage was 3.3X on a quarter-annualized basis.

The company is targeting a fourth-quarter 2026 annualized leverage ratio of 5.6X to 6.2X. Alexandria expects dispositions, partial-interest sales and other capital sources to help improve leverage during the second half of 2026.

ARE Narrows Its 2026 FFO Outlook

Alexandria narrowed its 2026 adjusted FFO guidance to $6.35-$6.45 per share from $6.30-$6.50. The midpoint remained unchanged at $6.40, reflecting greater visibility into full-year results. The Zacks Consensus Estimate for the same is currently pegged at $6.36.

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 has a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Cousins Properties Inc. CUZ reported second-quarter 2026 FFO of 75 cents per share, beating the Zacks Consensus Estimate of 74 cents. The metric rose 7.1% from the year-ago quarter.

Rental property revenues increased 11.8% year over year to $265.7 million and surpassed the consensus mark of $263.6 million. The results reflected strong leasing momentum, higher rental revenues and solid same-property NOI growth.

BXP, Inc. BXP reported second-quarter 2026 FFO of $1.78 per share, beating the Zacks Consensus Estimate of $1.71. FFO rose 4.1% from the year-ago period.

Lease revenues increased 3.2% year over year to $831.68 million and surpassed the consensus mark of $812.49 million. Results reflected higher occupancy and same-property NOI growth, which supported the FFO beat.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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