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William Crooker

Thank you, Steve. Good morning, everybody, and welcome to the first quarter earnings call for STAG Industrial. You're pleased to have you join us and look forward to telling you about the first quarter 2025 results.
We had a very strong start to the year, resulting in core FFO per share of $0.61 in the first quarter, exceeding our initial expectations. I'm happy to report that we have already leased 78.5% of the operating portfolio square feet we currently expect to lease in 2025, achieving cash leasing spreads of 25.1%.
This level of leasing is at a similar pace to last year and consistent over the last few years. While tenant activity was healthy in Q1, the escalation of the global trade war continues to monopolize headlines. At this point, it is too early to quantify the potential impact of tariffs on our business. With the threat and implementation of tariffs, we have heard from some of our tenants that a key priority for them is diversification of their supply chains. We view this as a net positive to our portfolio, given our geographic diversity and focus on CBRE Tier 1 markets.
Generally, we have witnessed some lengthening and lease gestation periods coming from these macroeconomic events. We are still seeing plenty of tours for our vacant spaces, over those tours are taking longer to convert to signed LOIs. With that being said, tenants are continuing to make leasing decisions in light of current uncertainty.
Through today, we have signed 3.6 million square feet of leases commencing in the second quarter, $1 million of which is new leasing. This is highlighted by a 500,000 square foot full building lease executed in the Savannah market.
This lease was accomplished with zero downtime and produced a 25% cash leasing spread. The supply pipeline continues to contract with the national under construction pipeline decreasing more than 16% sequentially since the fourth quarter. In the longer term, weaker economic growth may negatively impact warehouse space demand, but this will be partially offset by increased nearshoring and onshoring activity. STAG's portfolio would be a relative beneficiary compared to other industrial portfolios due to our geographic footprint.
Moving to acquisitions. Volume for the first quarter totaled $43 million. This consisted of three buildings with cash and straight-line cap rates of 6.8% and 7.0%, respectively. In January, STAG acquired a 162,000 square foot building located in Chae, Minnesota for $16.6 million at a cash cap rate of 6.5%. The building is 100% leased at rents approximately 40% below market to a single tenant with strong credit profile. This acquisition provided STAG the opportunity to acquire a stabilized deal at an attractive yield and strong projected same-store NOI growth.
In February, STAG closed on a two-building portfolio totaling 232,000 square feet for $26.7 million and a cash cap rate of 6.9%. The portfolio is located in Buffalo Grove, Illinois, an infill submarket of Chicago. The portfolio is 100% leased to two tenants with a weighted average lease term of 3.3 years. The transaction provided an attractive combination of high yield and durable cash flow given the entrenched tenancy. In terms of dispositions this quarter, we sold one building in Nashville, New Hampshire for gross proceeds of $67 million, representing a cash cap rate of 4.9%.
This disposition was a result of our team successfully repositioning the asset and ultimately selling it to a user. On the development front, we have approximately 2.5 million square feet of activity across 11 buildings in the US.
Roughly 50% of that 2.5 million square feet is under construction and 16% is pre-leased. The remaining 50% has been delivered and is currently 51% leased. This includes a new lease totaling 102,000 square feet of warehouse and distribution space, which commenced at our building in Welford, South Carolina on April 1.
With that, I will turn it over to Matt, who will cover our remaining results and updates to guidance.

Matts Pinard

Thank you, Bill, and good morning, everyone. For FFO per share was $0.61 for the quarter an increase of 3.4% as compared to last year. Cash available for distribution totaled $106.5 million, an increase of 8.5% as compared to the prior period. Leverage remains low with net debt to annualized run rate adjusted EBITDA equal to 5.2 times. Liquidity stood at $1 billion at quarter end on incorporating committed private placement debt proceeds.
During the quarter, we commenced 36 leases totaling 5 million square feet, which generated cash and straight-line leasing spreads of 27.3% and 42.1%, respectively. Retention for the quarter was 85.3%. As mentioned by Bill, we have accomplished 78.5% of the operating portfolio of square feet we currently expect to lease in 2025, achieving 25.1% cash leasing spreads. This demonstrates the strength of our portfolio. STAG has started the second quarter of leasing with strong momentum.
This is highlighted by the execution of 1 million square feet of new leasing commencing in second quarter thus far. We will release the second quarter business update at the end of the week, similar to previous updates in advance of a large industry conference will be attending next week.
We achieved same-store cash NOI growth of 3.4% for the quarter. Primary drivers of our same-store growth in the first quarter include the leasing spread to 27.3% and annual escalators of 2.8%, partially offset by previously forecasted and now realized occupancy loss of 80 basis points.
Moving to capital market activity. We repaid the $100 million private placement note fee, which matured on February 20. There are minimal debt maturities remaining in 2025. Subsequent to quarter end, on April 15, the company entered into a note purchase agreement to issue $550 million of fixed rate senior unsecured notes in a private placement offering.
The notes considered of 5, 8 and 10-year tenures with a weighted average fixed interest rate of 5.65% and a weighted average tenor of 6.5 years. The notes will be funded on June 25, and the proceeds will be used to pay down the revolver, which will restore liquidity to approximately $1 billion. We experienced minimal credit loss in the first quarter. There is no update for discussions with American Power Distributors at this time.
American Power Distributors are current under 225 rents through today. At this point, we are maintaining our 2025 credit loss guidance of 75 basis points and we're maintaining all other guidance as well.
I will now turn it back over to Bill.

William Crooker

Thank you, Matt. I want to thank our team for their continued hard work and achievement towards our 2025 goals. Our team continues to drive value in all macro environments. STAG has set the foundation of sustainable growth in 2025, and will continue to benefit from a strong balance sheet, ample liquidity and broad market diversification.
We will now turn it back to the operator for questions.

Question and Answer Session

Operator

Thank you. We will now be conducting a question and answer session.(Operator instructions)
Craig Mailman, Citi.

Craig Mailman

Hey, good morning. Matt, did I hear you right that you guys have signed 1 million square feet of new leasing quarter-to-date, so just in the month of April?

William Crooker

Yes, Craig, it's Bill. Yes, in Q2, we've signed 3.6 million -- we have 3.6 million leases commencing, $1 million of which is new leasing. And one success we had was we had a space, a 500,000 square foot space that were notified a couple of months ago that they were going to vacate in Q2, and we backfilled that space with no downtime, seven-year lease, no downtime on a 25% rollover leasing spread. So really happy with the execution there.

Craig Mailman

And so apologies. So you keep saying commenced, was the 1 million square feet of new leases executed quarter-to-date or some of those were done before and they'll just commence in the quarter?

William Crooker

It's a mix with the new leasing, generally, they're signed and commencing in a shorter window versus some of the renewals may have been executed earlier. But for example, the 1 million square feet that's commencing in effectively April was all signed in the last 30 to 60 days.

Craig Mailman

Okay. And then just for the follow-up, can you just talk about kind of the demand that you're seeing across different submarkets, right? You guys have had good activity in Greenville, which is maybe auto related. Could you talk about what you're seeing in more of your manufacturing type markets versus distribution? Are there any differences you're seeing across demand and tenant conversations?

William Crooker

I mean the tenant conversation that we've had is, the tariffs everything that we're seeing in the macro environment is just causing a little bit more uncertainty. And with that uncertainty creates a little bit longer timeframe between lease negotiations and signing an LOI in the lease.
With respect to markets, I mean, kind of similar to last quarter where -- some of those Midwest markets are operating really well, Milwaukee, Chicago, Minneapolis is doing really well. We're still seeing good demand in Detroit. And then Sun Belt is strong.
Nashville is really strong. And in markets that in one of which you noted that's improving. Greenville is improving, Columbus is improving. And then I'm sure if you had another follow-up question is, what's the -- weaker markets. We're seeing some -- a little bit of weakness in Atlanta, certainly some weakness. We own an asset in San Diego, a lot of weakness there. And then Indianapolis is still a little slow.
But overall, our tenants are still executing leasing leases. It's just taking a little bit longer. And just one other I guess, point I'd like to make is we're seeing some good demand from tenants wanting to renew this early. So leases that are rolling in '26, even 12 months out. We're in conversations with large tenants to renew those leases. So I think there's a lot of demand in the system, but with the events in the past 30 days, it just creates a little bit more uncertainty and some of those discussions taking a little bit longer than what they normally take.

Operator

Great. Thank you.

William Crooker

Thanks, Greg.

Operator

Jonathan Hughes, Raymond James.

Jonathan Hughes

Hey good morning. Thanks for the prepared remarks. Just kind of sticking with leasing activity there. These tenants that are coming to you, are they just trying to renew early to get ahead of the expected supply inflection in hopes of achieving better rates? Was there an increased push to lease space ahead of tariffs, so they could fill space with imported goods. Just really trying to better understand that strong leasing volume because you're at kind of 11 million square feet year-to-date, that's not far off last year's total and only at $7 million expiring at the start of the year. So any team as to why the early renewals?

William Crooker

Yes. I mean we just sat with the regional managers yesterday and talked about that exact point is, I think there's a combination, right? I mean there's still demand in the system, especially for these early renewals. I think tenants are seeing a little bit of an opportunity, right, with some of the noise out there to say, hey, maybe we can get a little bit better rate instead of waiting 12 months when we're post that inflection point whenever that may be. And then rates start to increase at a faster pace and tenants need the space, right?
There's still demand. I still think there's pent-up demand from last year. Tenants took a lot of time leasing pace last year in front of the election. And then we saw a lot of activity to start the year. And then we have a little bit of call it, a little bit of a slowdown or taking a step back, evaluating everything that's going on from a macro level in the past month.
But tenants still need space. It was really optimistic with the new leasing that we've signed in Q2, 1 million square feet, one month into the second quarter of new leasing. That's a big number for us. So really happy with that. And it was a big number on executing with some pretty strong leasing spreads.
So overall, the demand feels really good. I think tenants are just taking a little bit more time making those decisions. And the tenants that are in those spaces to your point, I think, you're trying to get ahead of some of the some of what we see as potential inflection point at the end of this year.

Jonathan Hughes

Thanks for that. I'll see the floor.

Operator

Vince Tibone, Green Street.

Vince Tibone

Hi, good morning. Could you discuss trends in transactions market since April 2? And more specifically, are you seeing any retrading activity just given the uncertainty? Or potential sellers pulling deals that have already begun some form of formal marketing process. Just curious kind of how the transaction market has kind of evolved in the last few weeks.

William Crooker

Yes, I'll start off and then I'll pass it off to Mike, Ben. Start at the beginning of the year was the private market continued to be really strong, public bids on properties, maybe a little bit wider than the private markets. We saw some big portfolios come out of either a portfolio sale or recap come out to the market at some pretty attractive pricing that was compared to our comparable to portfolio. And to date, we haven't seen those trade. Broker feedback has been -- and the buyers are still involved.
There's still a lot of bids for these properties, but nothing has traded. And I think -- I may be wrong here, but I think one or two smaller portfolios have hold just due to some dislocation in pricing. But Mike, I'll let you elaborate on that a little bit.

Michael Chase

Sure. Yes. Just recently, we have been getting some information on a few portfolios, both large and small that have been pulled from the market just because of the volatility and concerns about pricing. We haven't heard a lot about retrading, maybe one or two, but it's mostly just sellers pulling portfolios or deals from the market to see where the volatility settles out.

Matts Pinard

Yes. And Vince, just one more comment there. I don't think it's too dissimilar to what we've seen over the past four to five years really since COVID, where you have these either spike in race or macro uncertainty and volatility enters the market, bid-ask spreads widen. It goes on a, call it, a three-month, four-month pause? And then next thing you know the acquisition transaction market starts to improve.
So that is -- it's not uncommon for us to see this. I mean, for us, we've got a really strong balance sheet, great liquidity. And when we see these type of situations, we're comfortable just waiting it out and then pouncing on opportunities when they present themselves.

Vince Tibone

No, that's really helpful color. And how are you thinking about your cost of capital? I mean, just given recent share price changes. So you have provided the (inaudible) of stable cap rates. I mean is it fair to assume you kind of want your implied cap rate to get closer to that range? Or obviously, I imagine the hurdle is higher to to buy things today than it was. Just talk a little bit about you didn't change acquisition guidance, but I imagine there's some change in underwriting or just given your.

William Crooker

Yes. I'll talk about the acquisition guidance, and then Matt can jump in for cost of capital. But our acquisition -- initial acquisition guidance was the same as it is today. Everything has been affirmed. But -- that guidance was a wide range.
And as we noted at last call and again this call, it's very back-end weighted. So there's very little impact to our core FFO from our acquisition guide. So we have the ability to acquire a lot of product. If our cost of capital is supportive of where we can deploy it accretively, generally in these situations of volatility, and we've had this a couple of years, we do a wide range of acquisition and we assess that as we move through the year.
It's a little too early in the year to change that. But just a reminder to everyone, it's back-end weighted and very little impact to our core FFO guide, Matt, you can jump in for cost of capital.

Matts Pinard

Yes, Vince, I think cost of capital is the easiest one here. You heard in the prepared remarks in the press release, we just raised north of $0.5 billion of long-term debt at 5.65% and if that was all 10-year money, it's 5% to 5.75%. So that part, as Bill mentioned, once we fund this private place note, we're going to have $1 billion I also want to reiterate the point that we're retaining a lot of capital. We retain north of $35 million of cash after dividends paid in the first quarter. That's great capital for us.
The other point I and I think it's very, very much apparent in this quarter, but it is the way that we view our cost of capital is accretive recycling capital. But going back to that Nashville sale, we received $67 million of proceeds at pricing sub-5%. It was a 4.9% cap rate. We redeployed two-thirds of that money into assets that Bill described in his prepared remarks that fit our portfolio perfectly in markets that we love at stabilized cap rates close to 7%.
So when we look at how we deploy capital in the sources, certainly in this environment, as you mentioned, with the volatility in the share price, accretive recycling and capital, coupled with the cash that we are able to retain gives us some flexibility to be opportunistic even in this market.

Vince Tibone

Thank you.

William Crooker

And just one some more points, Vince, on that private placement transaction. I want to give Matt some team credit there, but that was a cover, I think, $200 million on the cover of that transaction, and we raised $550 million, we had over $3 billion of demand for that transaction. So there's a lot of liquidity in that market at very attractive pricing. So I'm really happy with the execution Matt and team did there

Operator

Mr. Thibon, are you done with the question?

Vince Tibone

Yes, thank you.

Operator

Nick Thillman, Baird.

Nick Thillman

Hey, good morning guys. Maybe digging a little bit more into the acquisitions and kind of what you're seeing there, understanding that your probably return thresholds are a little bit higher. But just a little bit more curious on kind of the characteristics of the assets you're rating. Are you looking for more near-term walls, longer-term walls? And I know you guys have made a little bit more pivot into multi-tenant assets for a single tenant, but how would you like describe the mix of that sort of pipeline?

William Crooker

Yes. I mean the mix is a broad mix of assets that we evaluate. This quarter, it happened to be a two-building portfolio and then an asset right outside of Minneapolis, both assets, strong markets, ability to mark those assets to market. I think the Minneapolis asset, I think, is 40% below market. So we're not focusing on one type of acquisition.
We're not just saying we want to buy 3.5-year, 4.5-year lease or 7-year lease or a 10-year lease, we're evaluating the opportunities. Our thresholds have effectively increased just based on the inputs that go into our underwriting model. But we're evaluating long-term leases, short-term leases, roll-ups, even vacant assets.
But depending on where those assets are, we might extend lease-up period for some of those assets, just given some of the earlier commentary about some tenants taking a little bit longer to make leasing decisions. So it all factors into our underwriting, but we're looking at everything.

Nick Thillman

That's helpful. And then Matt, maybe on credit loss. You mentioned minimal amount in the first quarter, maybe put some more details or numbers around that. And then 75 basis points for the full year, how much of that is attributable to American Tire?

Matts Pinard

Thanks for the question, Nick. When I say minimal, I mean 1 basis point is roughly $50,000 of credit loss. An important note here is related to American tires, they're current on rent through today. We have not incurred any credit loss related to that situation. With that being said, we're still in that process, expectations by the end of May, we will have a firmer idea of the exact project and potential restructure.
So we have 75 basis points of credit loss into our guidance, which is the same as that we had in February when we initiated, we just said going back to Bill's original points, given this volatility, the last thing we wanted to do was get aggressive on our credit loss assumption. We'll continue to update the market if and when there's an ATD settlement related to our leases.
But in terms of the split, our guidance is 50 basis points of cash credit loss, which is basically how we start every single year, and we added 25 specifically to the American Power distributor situation. And again, I want to reiterate the current on every single dollar owed through today.

Nick Thillman

Very helpful. Thank you.

Operator

Michael Carroll, RBC.

Michael Carroll

Yeah, thanks. Bill, I wanted to circle back on your comments on the broader leasing activity that it appears to be holding in there, at least so far. Is that more focused on renewals? Do you hear that correctly? What new leasing activity as tenants kind of pulled back on new leasing and most of the activity you're seeing right now is on renewals?

William Crooker

Well, certainly, this quarter, we had a lot more renewal leasing than we did new leasing. But in the second quarter, we're through April, we've commenced 3.6 million square feet of which $1 million is new leasing. So really 4 times the amount of new leasing that we did in the first quarter. So I don't know if it's fair to say that new leasing is pulled back significantly. It's just taking some tenants a little bit longer to make decisions.
The example I said earlier, I mean, that time made a decision rather quickly because we just got noticed a couple of months ago that the the tenant that was in that space was not renewing, and we backfilled that 500,000 square foot facility with zero downtime. So the tenants are leasing space. They are making decisions. The renewal market really strong, our renewals are very high to start the year. And we're in discussions with a number of tenants for early renewals for leases expiring in '26. So the demand is healthy, but I do want to caution that, too, which is taking a little bit longer on some spaces, and there's some uncertainty in the macro environment.

Michael Carroll

Okay. And I know you've made really good progress achieving your 2025 leasing targets right at 78%, 79% done so far. That is tracking a little bit below what it was last year. I mean can we read anything into that? Or is it just kind of in the normal realm of expectations, just given I think last year, you're in the low 80s, so not much further below. So could we read anything into that at all?

William Crooker

Yes. I mean if we're 1% or 2% difference, we kind of view that as in line. So I wouldn't read anything into that.

Michael Carroll

Okay, thanks.

Operator

Eric Borden, BMO Capital Markets.

Eric Borden

Hey, good morning, everyone. So it sounds like new leasing is off to a solid start post quarter end driven by one tenant. But I was hoping that you could provide an update on demand for your development pipeline, how are KPIs tracking interest in tours? And if you think there's a potential -- if the lease-up could take longer than your initial underwriting, just given the current macro uncertainty?

William Crooker

Yes. I mean we're still -- we have a lot of activity at our available Greenville asset. That's the 240,000 square foot facility. I think in general, new leasing for new developments is a little slower, and that's more of a macro comment.
But we're seeing a lot of good activity at that facility. And with respect to the Tampa facilities, some really strong leasing activity at the first one, the 6020 Power Road, and the 6508 Power Road is also getting a lot of activity.
Hopefully, there's the something report soon on at least one of those, and the casual drive facility, as I mentioned, we leased 100,000 square feet there. So that's 69%. So some good activity, and those are -- I just covered all the ones that are delivered. The developments that have not delivered, the Nashville is delivering this quarter, still probably arguably the strongest industrial market in the US right now.
Portlands a build-to-suit, the Reno has some really good activity. And the Charlottes really just kind of got started. So overall, some really good activity. If anything, you might see a little bit of slippage maybe with some of the lease-up periods, and maybe depending on where deals get stuck, maybe a little slippage on ongoing yields, but overall, really happy with the activity

Eric Borden

Okay. And then Matt, I think last quarter, you guys -- you said you expected about 100 basis points of occupancy loss. I was just wondering if you could provide an update there. And how much of the 100 basis points is currently allocated to tenants, if any? And then what sort of buffer do you have built into the assumption there?

Matts Pinard

Yes. I think that there's a little bit unpack there. Just to answer the direct question first. We have not changed any piece of our guidance, and that includes the 100 basis points of occupancy loss that we expect. In terms of what I think -- I think the question is, did we stress test our projections, -- what's our downside?
We absolutely did. Again, we're incredibly comfortable with all of our guidance measures. As Bill mentioned, we're even a little bit ahead this quarter, but we're being cautious given the market uncertainty that we're all living in right now.
Remember, we've accomplished 80% of our leasing. So 80% of what we expect to happen this year has already been booked. So when you stress it's really the remaining 20%. But the variables that we emphasize are pretty straightforward.
What does it look like if we don't acquire an additional deal this year, was it look like if we don't lease any of our developments this year, was it look like if we moderate the projected leasing related to that remaining 20%, it all ends up within our range, we're incredibly comfortable. So 100 basis points of average occupancy as continues to be the expectation for this year.

Eric Borden

Okay. Well, thank you very much.

Operator

Jason Belcher, Wells Fargo.

Jason Belcher

Yeah, hi, good morning, Just following up on the bad debt front. Wondering if you could talk about any tenant categories that might be giving you a little more concern than others in the current environment and also how your tenant watch list has trended over the past couple of quarters?

Matts Pinard

Yes, absolutely. Thanks for the question, Jason. So we look at this off and we have a three-person fully dedicated credit team -- this is their job. We have financial disclosure, transparency clauses and 90% plus of our leases. We look hard at every sector.
It's really not sector, is what we're taking. It's not food and beverage. It's not housing. It's not consumer. It really is taking a look at the tenants that have low margin businesses with highly levered balance sheets. And good examples are the bankruptcies seen by cons, vitamin shops, and we've talked about American Tire a few times here.
So from a sector by sector, we really couldn't say anything there, it really was digging into the balance sheet and what are they selling and what margins. The watch list is dynamic, but it has not expanded materially at all. It really is kind of the same themes and really it's kind of dominated by that American Tire discussion that we had previously.

Jason Belcher

That's helpful. Thank you. And then back on the leasing front, I know you said you've completed close to, I think, 80% of expected '25 leasing and you've already begun to tackle some of the '26 expirations. Just wondering if you could share what kind of rent spreads you're seeing on those '26 expirations and how that compares to the spreads done for '25 and then what percent of '26 expirations have been addressed so far.

William Crooker

Yes. It's a little too early for us to discuss '26 spreads. I mean right now, we've executed given 15% plus of our '26 leasing. So in line with what we've done in past years at this time, but it's still a little early to talk about economics for next year.

Jason Belcher

Understood. Thanks guys.

William Crooker

Thanks.

Operator

Mike Mueller, JPMorgan.

Mike Mueller

Yeah. Sorry, I guess in the world where you have just lesser overall demand, are there any segments where, I don't know, it seems to be less of a pause or just kind of continuing along at more of an overall normal clip? Or is everything kind of muted that you're seeing across the board regardless of the category?

William Crooker

Yes. I mean it's an interesting question. I mean, I think there's a big assumption there, right, that everything is muted, I would say, demand is -- feels like it's still there. I mean, we've had some really good new leasing, as I noted a couple of times. It's taking a little bit longer to make decisions.
We're still seeing some strong activity from 3PLs. And when you look at the markets, I mentioned earlier, the strong markets. I mean, a lot of those markets have some sort of manufacturing component to them with some distribution components. So overall, I mean, we feel pretty good about the demand side. It's just in some situations, it might take a little bit longer to lease up some spaces, and that's just tenants taking longer to make decisions given the uncertainty.
I mean, if you peel back before the last 30 days, I mean, leasing activity was significant. I mean in terms of tours, RFPs, everybody was extremely busy with the team, brokers are really busy -- and then things just started to slow down a little bit when folks were looking at the macro environment, what does that mean for their business and making a long-term decision.
With that being said, a lot of those folks still made that long-term decision because they need to. And I do think there was some pent-up demand from last year and the delayed decision-making that made its way into this year. And absent the last, call it, 30 days, I think leasing on the whole for the industrial sector would have been up pretty significantly. So we still feel really good about the demand side. It just might take a little longer.

Mike Mueller

Got it. And maybe one follow-up on that. Before you were talking about activity at Greenville and Tampa being pretty good. Can you just kind of like put some context around that, like roughly how many tours are you seeing now? How frequent are they? And how did that compare to a month or two ago?

William Crooker

I would say, as compared to a month or two ago, I would say probably flat, maybe slightly down. But the activity that we're seeing is, call it, for lack of a better term, better activity, so more likely to get a deal done activity versus just a lot of folks kicking the tires.

Mike Mueller

Got it. Okay, thank you.

Operator

Rich Anderson, Wedbush Securities.

Rich Anderson

Thank you and good morning. So I wanted to talk about the 85% retention. And if I could marry it with the pace of early leasing, you meant 79% of it already addressed. Is it fair to say that you kind of get a bigger retention number to start the year and that kind of marries with the activity that you've seen in terms of 2025 expirations because tenants in that case, sort of have made a decision to stick around, and so that the retention would maybe naturally trickle down as the year progresses. Is that the right way to think about it in terms of those two observations?

Matts Pinard

Yes, Rich, I think you got it. Just to say it in a different way, and I'm sorry to repeat myself, but we've got 80% of our leasing, and we didn't change any guidance. So our guidance range is 70% to 75%. If we've done 80% of our lease and I'll commence this year, we have a pretty good clear line of sight of what retention will be. I think 85% in the first quarter is just mathematically high.
As you see from almost 5 million square feet of leased and the majority of that was renewal. Bill did mentioned the 500,000 square foot immediate backfill, but that's a negative retention event just for that metric in the second quarter. The way I would explain is we've done most of our book of business this year, and we feel very confident with our current guidance.

William Crooker

Yes. We guide to just an absolute retention number. We don't guide to retention adjusted for immediate backfills, which is basically filling the space with zero to one or two months at the time. And so that 500,000 square foot is going to add to that retention adjusted for immediate backfill numbers. So as that number ticks up, it really drops to the bottom line. So it's a great outcome for us.

Rich Anderson

Okay. Great. And then probably too early to observe this yet, but are you keeping an eye on where perhaps new tenants are coming from, you would think that your area of the country would be -- I know you think this beneficiary of onshoring, nearshoring. What about like -- I'm going to use the term in-migration into your area. I mean, is that something that you're tracking to see where perhaps new tenants are coming from to sort of take advantage of the manufacturing sort of DNA of your geography.

William Crooker

Yes. I mean it's a little early to talk too much about that, and there's not a tremendous amount of data on that. But when you look at the demand for our buildings today. It's certainly distribution demand. It's consumption, call it, for population migration.
That's still a theme. And then it's it's manufacturing. And as I said in the initial and prepared remarks, tenants have been talking for the last couple of years about diversifying their supply chains, right? And there's a lot of reasons why, right? You've got port strikes, you've got low water levels in the Panama Canal. You've got terrorist attacks, you've got tariffs.
There are a number of reasons why large companies should diversify their supply chains. And there has been a lot of dialogue about that. And you've started to see it over the past couple of years, a few years with some onshoring with some near-shoring and certainly, some good activity on other ports in the US. I mean, just I hate to keep bringing it up, but the tenant we signed in Q2, I mean that's a 3PL that distributes larger goods over 50 pounds for goods that are coming in the Savannah port, and they signed a seven-year lease, right?
That's a new demand for that market. That was clearly something that was driven on diversifying supply chain. So we think that's a real theme. We think it's going to continue, and we think we're going to be a net benefiter from that.

Rich Anderson

Okay, great. Thanks very much.

William Crooker

Thanks.

Operator

Michael Griffin, Evercore.

Michael Griffin

Great, thanks. Wondering if you can give us any insight into whether the concessionary environment has changed. It seems like tenants are still kind of kicking the tire, so to say, on making decisions. So -- have you offered maybe any more in the concessions in order to entice them to sign leases quicker? Or are you really holding out to kind of get the best net effective rent.

William Crooker

We hold out to the best we can. I mean some markets that have some higher vacancy rates, and we think that it's a great transaction. I may give another month or two of free rent. With respect to leasing commissions, I mean that's kind of a market commission.
Those can kind of change year-to-year. So I don't really view that as more of a concession. When I think it concessions to tenants, it's really on the TIs and free rent side of it. So it all depends on the market. So I think broadly across the industrial sector, you're probably going to see free rent increase a little bit. And TIs, I think it really, really varies. I mean if you look at our small sample size and new leasing in Q1, it looks like there's an elevated TI really that was more of a building improvement.
We enhanced the ability of the building. We had to put in a couple of drive in doors that really are going to enhance our property for that market. We put it in the TI column because the tenant wanted it, but we think it's going to increase leasing activity, and we'll stay with the building after. So it's not really a concession there. So on the whole, I think you probably see a little bit of free rent, but generally, we're trying to hold that effect around as best we can.

Michael Griffin

Great, thanks. That's helpful. And then Matt, I appreciate the commentary on American Tire and kind of the bad debt assumptions and realize they're current on rent through April and maybe this is a little hypothetical, but if they were to reject the leases, do you have a sense of what the demand would be like to backfill some of those properties? Or is it still kind of too early to speculate?

William Crooker

It really is market -- this is Bill. It's really market-to-market specific. There's seven leases. The good thing is the buildings are newer buildings in the 100,000 to 120,000 square foot range. So a decent clear height for those buildings.
I think anywhere like 28 to 32 or 36 foot. So good buildings in the market would have to go market by market. And just to take a step back, this it is one of our top tenants, but it's still 1% of our ABR, right? So it's really not that material of a tenant. We spend a lot of time talking about it, but overall in the grand scheme of things, it's really not that big of a percentage of our ABR. And we're in active negotiations with them.

Michael Griffin

Great, That's it for me. Thanks for the time.

William Crooker

Thank you.

Operator

Thank you. Ladies and gentlemen, we have reached the end of question and answer session. I would now like to turn the floor over to Bill Crooker for closing comments.

William Crooker

Thank you all for joining the call this morning. As always, I appreciate the thoughtful questions and look forward to seeing you all soon. Take care.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.