Phillips Edison Lifts 2026 Guidance as Leasing Spreads Strengthen

Phillips Edison & Company, Inc. (Nasdaq: PECO) increased several full-year 2026 guidance ranges after reporting strong leasing economics and 4.3% year-to-date same-center net operating income growth through the third quarter. The grocery-anchored shopping-center REIT now expects diluted net income of $1.21 to $1.24 per share, up from its previous range of $0.95 to $0.97, while modestly increasing the lower ends of its Nareit FFO, Core FFO and same-center NOI growth forecasts.

PECO’s updated outlook calls for diluted Nareit FFO of $2.68 to $2.72 per share, compared with $2.67 to $2.72 previously. Diluted Core FFO is projected at $2.75 to $2.79 per share, versus the prior $2.73 to $2.79 range. At the new midpoints, the company said Nareit FFO and Core FFO would grow 6.3% and 6.5%, respectively.

The company also expects full-year same-center NOI growth of 3.5% to 4.0%, narrowing the previous 3.4% to 4.0% range. Same-center NOI, a non-GAAP measure focused on properties owned throughout both comparable periods, grew 4.3% year to date. Through September, PECO reported net income of $1.05 per diluted share, Nareit FFO of $2.03 and Core FFO of $2.09.

Leasing demand supports rent growth

Leasing activity was a central operating theme in the quarter. Portfolio leased occupancy stood at 97.5% as of September 30, including 95.1% for inline space. PECO executed 238 leases during the quarter and retained 92.2% of tenants with expiring leases.

Comparable renewal rent spreads reached a company record of 25.2%, while comparable new-lease spreads were 26.3%. Renewal leasing produced a 3.1% compound annual growth rate in rents, and new leasing generated a 2.0% rate. PECO said high occupancy and competition for limited available space supported its pricing power.

The portfolio’s grocery focus remains the foundation of that demand. Grocery-anchored centers account for 94% of annualized base rent, while necessity-based tenants generate 74%. About 83% of annualized base rent comes from centers where the grocery anchor ranks first or second by sales in its market. The company reported that national grocery-store visits totaled 17.6 billion for the trailing 12 months through September, compared with 17.5 billion in 2025.

PECO owned interests in 328 properties spanning 37.4 million square feet across 31 states at quarter-end, including assets held through unconsolidated joint ventures. Approximately half of annualized base rent came from Sun Belt states. Grocery was the largest tenant category at 27% of annualized base rent, followed by restaurants at 21%.

Acquisitions and redevelopment expand the growth pipeline

PECO maintained its 2026 gross acquisition expectation of $600 million to $700 million. Gross acquisitions totaled $459.7 million through the third quarter, including the company’s prorated interests in unconsolidated joint ventures. Including transactions completed after quarter-end and development land, the presentation listed approximately $519.1 million of 2026 investments through October 26.

The company is also expanding its Everyday Retail strategy, which targets essential-retail centers without requiring an owned grocery anchor. PECO had acquired 13 such centers for $300 million as of October 26 and said the platform could scale to $1 billion over the following 24 months. The acquired properties were underwritten to unlevered internal rates of return of at least 10%, with new rent spreads above 40% and renewal spreads above 25%, according to the presentation.

Development and redevelopment represent another source of internal growth. PECO had 25 projects under active construction, with an estimated total investment of about $86 million and expected average yields of 9% to 12%. During 2026, 17 projects reached stabilization, delivering more than 425,000 square feet and approximately $8 million of incremental annual NOI.

Management believes the existing portfolio can produce long-term same-center NOI growth of 3% to 4% without occupancy gains, supported by contractual rent increases and leasing spreads. The company also sees 100 to 150 basis points of potential upside in same-center inline occupancy and is targeting an annual development and redevelopment pipeline of $75 million to $100 million. Combined internal and external growth drivers are intended to support long-term Core FFO per-share growth in the mid-to-high single digits, though these targets remain forward-looking.

PECO lowered its expected 2026 disposition range to $175 million to $210 million from $200 million to $250 million. Dispositions totaled about $174 million through the third quarter. Its forecast for net contributions to joint ventures remained $200 million to $250 million; after quarter-end, the company contributed $138.6 million to Grocery Retail Partners I LLC.

Liquidity and risk considerations

Pro forma for a new $350 million unsecured term loan completed on October 23 and repayment of a $162 million term loan, PECO reported approximately $950 million of liquidity. Net debt to adjusted EBITDAre was 5.2 times on a trailing-12-month basis and 5.0 times using the latest quarter annualized. About 85.2% of debt carried fixed rates, the weighted-average interest rate was 4.5%, and the weighted-average maturity was 5.5 years. Approximately 89% of assets were unencumbered, and the company said it had no meaningful debt maturities until 2030.

PECO’s outlook remains exposed to changes in economic and local real-estate conditions, tenant vacancies or financial distress, shifts in market rents, higher borrowing costs and its ability to refinance debt. Other identified uncertainties include competition and e-commerce, severe weather and climate-related damage, cybersecurity disruptions, tariffs and trade disruptions, and the company’s ability to re-lease or dispose of properties on acceptable terms.