Alexandria Real Estate Equities (NYSE:ARE) reported third-quarter 2026 funds from operations, as adjusted, of $1.54 per diluted share and reaffirmed the midpoint of its full-year guidance at $6.40 per share, while narrowing its guidance range to plus or minus $0.02.
The life-science real estate investment trust said leasing activity accelerated during the quarter, while it continued to shrink its development pipeline, raise capital and pursue sales of non-core assets and partial interests. The company also recorded $638 million of real estate impairments tied primarily to development, land and laboratory-conversion properties included in its disposition efforts.
Leasing Activity and Occupancy
Alexandria leased 1.236 million square feet during the third quarter, its highest total leasing volume in seven quarters. That figure included 451,000 square feet of previously vacant space, the second-highest quarterly amount in company history, according to Chief Financial Officer Marc Binda.
Executive Chairman and Founder Joel Marcus said 74% of leasing during the quarter came from existing tenants and carried a weighted average lease term of approximately 11 years. The company expects about 1.25 million square feet of leasing in the fourth quarter, with public biotechnology tenants expected to contribute more meaningfully after representing just 1.1% of third-quarter volume.
Occupancy ended the quarter at 87.1%, up 20 basis points from the second quarter. Alexandria said it continued to outperform broader market occupancy levels in Greater Boston, San Francisco and San Diego by 6% to 12%.
The company has 1.3 million square feet of leases that have been signed but are not yet reflected in occupancy. Those leases are expected to commence on average in June 2027, add 3.7% to occupancy over time and generate $52 million in annual rental revenue.
Same-property net operating income declined 6.7% during the quarter, or 2.8% on a cash basis, primarily because of lower occupancy in 2026. Binda said the results improved from the prior quarter, aided by occupancy changes in the comparable-property pool and properties that were designated as held for sale.
2027 Occupancy Pressure and Leasing Priorities
Management said it expects temporary occupancy pressure in the first half of 2027, reflecting approximately 1.4 million square feet of key lease expirations expected to experience average downtime of nine to 24 months. Those expirations represent $101 million of expiring rent and could also be affected by tenant wind-downs.
Marcus said more than 60% of the company’s 1.37 million square feet of 2027 lease rollovers expected to have downtime is now being discussed with specific prospective tenants. He cited more than 250,000 square feet at Campus Point in San Diego that Bristol Myers is scheduled to vacate next year, adding that Alexandria was in advanced discussions on nearly 200,000 square feet of that space.
Binda said the company expects average occupancy to grow in 2028, but that outcome will require continued leasing of vacant space. Management also said same-property performance is expected to improve from 2026 to 2027 and again from 2027 to 2028, though 2027 same-property performance is still expected to be negative because of occupancy.
Alexandria is also pursuing advanced technology companies as potential tenants for certain properties. Marcus said the opportunity depends on the specific space, noting that fully built lab space is not necessarily suitable for technology users, while office or shell space with substantial infrastructure on a mega campus may be attractive. He added that advanced technology tenants can potentially produce less downtime because some are well-capitalized and willing to fund significant tenant improvements themselves.
Pipeline Reduction and Asset Sales
The company delivered 529,000 square feet of development and redevelopment space during the quarter. The delivered space was 84% occupied and is expected to generate $40 million of annual net operating income.
Alexandria’s development and redevelopment pipeline declined by more than half, to 1.6 million square feet at the end of the third quarter from 3.6 million square feet in the fourth quarter of 2025. It had 906,000 square feet under construction and expected to stabilize through 2028, of which 77% was leased or under negotiation.
The company also had 667,000 square feet tied primarily to two projects where it is evaluating its business and financial strategy: 40 Sylvan Road in Waltham and 3000 Minuteman Road in Andover. Alexandria said advanced technology leasing at those projects could reduce future capital needs and generate revenue sooner, although placing space into the operating portfolio could reduce near-term operating occupancy.
At 311 Arsenal Street in Watertown, Alexandria executed a 67,000-square-foot lease and had 101,000 square feet under negotiation, primarily with advanced technology tenants. The company said this shift toward a lower-cost advanced technology strategy could reduce future construction needs by about $220 million over the next several years.
Alexandria also entered into a contract to sell most of its remaining investment in the 421 Park Drive development project in Boston’s Fenway neighborhood, with a closing expected in the fourth quarter. The buyer is expected to assume approximately $136 million of interior laboratory improvement costs.
The $638 million impairment charge included amounts tied to 421 Park Drive and a four-building Palo Alto office project that Alexandria had acquired with plans to convert it into laboratory space. The company now expects to sell the Palo Alto assets rather than proceed with redevelopment, citing limited life-science demand in that market.
Capital Plan and Balance Sheet
Alexandria completed $1.7 billion of capital activity since June 30, including $234 million of land and non-core asset dispositions, a $475 million Campus Point joint venture completed in October, and a $1 billion offering of 7.25% junior subordinated notes.
The rating agencies assigned the notes 50% equity credit, which Binda said supports Alexandria’s leverage target. The company said the offering also reduced its need for near-term asset sales and reliance on joint ventures.
Completed and pending dispositions and partial-interest sales totaled $2.6 billion, exceeding the midpoint of Alexandria’s $1.9 billion target by approximately $720 million. Management said the excess could allow it to defer some proceeds into 2027.
Alexandria retained control and consolidation of the Campus Point joint venture. Binda said the partnership is treated as permanent equity and that Alexandria has a call option, while the partner has a put right exercisable after seven years. Chief Executive Officer and Chief Investment Officer Peter Moglia clarified during the question-and-answer session that the partnership’s returns are not guaranteed.
The company ended the quarter with $4.6 billion of liquidity and extended its $5 billion unsecured senior credit facility to 2032. Alexandria said its average remaining debt maturity was 11.6 years, the longest among S&P 500 REITs, and it had only $350 million of debt maturities next year. Management reiterated its goal of reaching net debt to annualized adjusted EBITDA of 5.6 times to 6.2 times by the fourth quarter, with a longer-term objective of leverage in the mid-5-times range.
About Alexandria Real Estate Equities (NYSE:ARE)
Alexandria Real Estate Equities, Inc (NYSE:ARE) is a real estate investment trust that owns, operates and develops collaborative life science, agtech and advanced technology campuses. Its properties are designed for companies, research institutions and government agencies engaged in biotechnology, pharmaceuticals, medical devices, agriculture technology and related fields.
The company provides laboratory, office and research space, along with supporting amenities and infrastructure intended to foster collaboration among its tenants.
