AMB Predicts Occupancy, Rent Gains in Late 2010

SAN FRANCISCO-AMB Property Corp., an industrial REIT said Wednesday it expects occupancy and rents to bottom out in the next two quarters and begin to show improvement in the second half of 2010. Company executives cited industrial’s lagging relationship with the US economy, which is expected to show growth in the first half of 2010.

“Leasing and capital expenditures have been on hold as businesses focused on cutting costs and gaining efficiencies [but] decision making has resumed,” AMB chief executive Hamid R. Moghadam told analysts Wednesday afternoon. “Property showings and deals in negotiation are starting to increase and our strongest customers are beginning to execute previously shelved plans. The first wave of this [resumption of activity] will fill empty leased space, followed by demand for new space. It will take at least three to six months for the increased demand to show up as occupancies gains and revenue.”

For the time being, however, occupancy and rents remain unstable. While occupancy increased 50 basis points during the third quarter to 91%, same-store NOI is off by 7% from the same year-earlier period due primarily to lower than average same-store occupancies and rent changes on rollovers. On a trailing four-quarter basis, the average rent change on renewals and rollovers in AMB’s operating portfolio decreased 3.9%, including a 10.3% decline in the third quarter. To balance things out, AMB says it sold more than $200 million of real estate in the third quarter at an average cap rate of 6.2% for a net gain of $60 million.