Granite REIT Posts Strong Q1 2026 Results, Driven by Industrial and Warehouse Leasing Activity, Dispositions

Granite Real Estate Investment Trust (TSX: GRT.UN) reported net operating income of $134.2 million for the first quarter ended March 31, 2026, a $8.5 million increase over the $125.7 million recorded in the same period a year ago, the Toronto-based REIT announced May 6, 2026. The results were driven by new and renewal leasing activity, contractual rent adjustments, consumer price index-based increases, and eight income-producing property acquisitions completed in the United States and United Kingdom beginning in the second quarter of 2025.

Industrial and Warehouse Real Estate Leasing Drives NOI Growth

Granite achieved average rental rate spreads of 23% over expiring rents on approximately 1.1 million square feet of new leases and renewals that took effect during the first quarter of 2026. Constant currency same-property NOI on a cash basis grew 8.3% year-over-year, accelerating from the 4.7% growth recorded in the first quarter of 2025.

In-place occupancy across Granite's portfolio of logistics, warehouse, and industrial properties stood at 97.5% as of March 31, 2026, a decrease of 50 basis points from December 31, 2025, but an increase of 270 basis points compared to March 31, 2025. As of May 6, 2026, committed occupancy reached 98.3%.

Subsequent to the quarter's end, Granite executed a lease for approximately 225,000 square feet of previously vacant space at a property in Columbus, Ohio. The lease, commencing in the second quarter of 2026, is for a 60-month term with a North American third-party logistics company. The transaction brings the approximately 478,000-square-foot building to full occupancy for the quarter ending June 30, 2026.

Real Estate Acquisitions and Dispositions Reshape Portfolio

Granite completed two industrial real estate dispositions during the first quarter. On January 30, 2026, the REIT sold a 0.2 million square foot income-producing property in the Netherlands for gross proceeds of $37.6 million. On March 11, 2026, Granite completed the disposition of a 1.0 million square foot income-producing property in the United States for gross proceeds of $104.5 million.

As of March 31, 2026, two additional income-producing properties located in the United States and Canada were classified as assets held for sale with a combined fair value of $57.7 million.

Granite's portfolio comprised 139 income-producing properties as of March 31, 2026, representing approximately 61.5 million square feet of gross leasable area, compared to 141 properties and 62.6 million square feet at December 31, 2025. The overall capitalization rate held steady at 5.6%.

Commercial Real Estate Financing and Balance Sheet

Total debt declined to $3,216.8 million as of March 31, 2026, from $3,422.1 million at December 31, 2025, a reduction of approximately $205 million. The net leverage ratio improved to 33% from 35% over the same period, while the indebtedness ratio moved to 6.8x from 7.3x.

On March 24, 2026, Morningstar DBRS confirmed Granite REIT Holdings Limited Partnership's issuer rating and credit ratings on its debentures at BBB (high) and changed the trend to Positive from Stable.

Subsequent to March 31, 2026, Granite issued 65,100 units under its at-the-market equity distribution program at an average unit price of $93.67, generating gross proceeds of $6.1 million before issuance costs.

Funds from operations were $95.8 million, or $1.57 per unit, in the first quarter of 2026, compared to $91.0 million, or $1.46 per unit, in the prior year period. Adjusted funds from operations were $85.9 million, or $1.41 per unit, compared to $88.4 million, or $1.41 per unit, in the first quarter of 2025. The AFFO payout ratio was 63% for the quarter, up from 60% in the first quarter of 2025. Monthly distributions paid per unit were $0.89, compared to $0.85 in the prior year period.

Foreign exchange movements had an unfavorable impact of $0.02 per unit on both FFO and AFFO in the first quarter of 2026 relative to the same period in 2025, as the Canadian dollar strengthened against the U.S. dollar but weakened against the Euro. The fair value of investment properties was increased by unrealized foreign exchange gains of $81.4 million, primarily resulting from the relative weakening of the Canadian dollar against the U.S. dollar.

Real Estate Development Outlook and 2026 Guidance

Granite recognized $7.3 million in net fair value gains on investment properties in the first quarter of 2026, primarily attributable to increases in fair market rents, partially offset by expansion in discount and terminal capitalization rates at select U.S. properties. The fair value of investment properties was $9,474.8 million as of March 31, 2026, compared to $9,478.4 million at December 31, 2025.

Net income attributable to unitholders was $91.2 million in the first quarter of 2026, compared to $43.9 million in the prior year period. The increase was primarily due to a $55.5 million favorable change in fair value adjustments on investment properties and the $8.5 million increase in NOI, partially offset by a $10.8 million increase in income tax expense, a $3.2 million increase in general and administrative expenses, and a $1.7 million increase in loss on sale of investment properties.

Granite is maintaining its full-year 2026 guidance, originally published February 25, 2026. The REIT projects FFO per unit of $6.25 to $6.40 and AFFO per unit of $5.40 to $5.55 for the year ending December 31, 2026. Constant currency same-property NOI on a cash basis is forecast at a four-quarter average of 5.5% to 6.5%. Maintenance capital expenditures, tenant allowances, and leasing commissions impacting AFFO are projected at $40.0 million. Guidance ranges reflect foreign currency exchange rate assumptions of 1.58 to 1.62 for EUR:CAD, 1.34 to 1.40 for USD:CAD, and 1.80 to 1.86 for GBP:CAD.

Magna International represented 27% of Granite's annualized revenue and 20% of gross leasable area as of March 31, 2026. The weighted average lease term across the portfolio was 5.3 years by gross leasable area.

Granite's Annual General Meeting of Unitholders is scheduled for June 4, 2026 at 10:00 a.m. ET, held virtually via live audio webcast. President and Chief Executive Officer Kevan Gorrie will chair a conference call to discuss the quarterly results on May 7, 2026 at 11:00 a.m. ET.

Sources: Granite REIT Q1 2026 Press Release