UPS 2026 Q1 Progress on Cost Reduction and Network Reconfiguration

EGP development leasing activity trends in Q1 2026

1) Pace of development leasing: improving, but still “measured”

• Management said development leasing continued the same trend as in Q4 and that, year-to-date, development leasing reached 54% of last year’s total. ¹
• They were encouraged by continued demand, but also noted that headline volatility and extended decision cycles were still slowing action, so the development pipeline was leasing at a more measured pace while maintaining projected yields. ¹

Trend takeaway: Q1 showed meaningful progress vs. the prior year benchmark (54% of total achieved YTD), yet management still characterized the operating pace as not fully “back to fast” due to ongoing decision-cycle drag. ¹

---

2) Demand environment: broad-based, with decision delays easing toward acceleration

• They indicated demand in development properties continued but leasing speed was constrained by “decision cycles remain extended.” ¹
• Management also highlighted that development leasing and prospecting was occurring across multiple markets, with development leasing signed to date in 9 markets and projects active in 13 different markets, suggesting broad-based demand rather than a single-market boom. ²

Trend takeaway: Q1’s development leasing momentum appears diversified across markets, and while demand exists, execution/leases are taking longer than in the fastest parts of the cycle. ¹²

---

3) Pipeline conversion: more deals turning into signed leases from earlier speculation

• On the leasing-yield/guidance mechanics, management described movement from earlier guidance assumptions: most of the ~$0.03 difference (from initial guidance) moved from speculative leasing to signed leases due to work completed over the prior few months. ³
• They also specified there remains some speculative exposure: the remaining $0.04 is speculative leasing, expected to ramp in the second half with most ramp into Q4. ³
• For the rest of the year, they discussed speculative development leasing NOI of about $0.04 in the second half, no assumption in Q2, and the activity ramps in Q3 and Q4 (totaling $0.04 for the year). ⁴

Trend takeaway: Q1 reflects ongoing conversion from speculative to signed development leasing, but a meaningful portion of the leasing still needs to occur later in 2026, particularly in Q3–Q4. ³⁴

---

4) Construction start cadence: supportive of leasing momentum

While the question is about development leasing activity, EGP connected leasing progress to starts:

• They commenced construction on 4 projects totaling 586,000 square feet, with 27% pre-leased. ¹
• In the broader Q1 discussion, management said they were pleased with activity and that in at least some cases they see a typical ability to start next-phase construction as leasing confirms demand, aiming to keep product coming as demand pulls it out. ⁵
• They also cited a concrete example from Q1: in Houston, they signed ~280,000 square feet in Q1 and broke ground on ~128,000 square feet, implying development starts are following lease commitments. ⁶

Trend takeaway: Q1 development leasing progress translated into real construction starts, indicating leasing activity is not “stalling” the development engine—though a pre-leasing rate of 27% shows the pipeline may still involve some forward execution beyond fully committed demand. ¹⁶

---

5) Guiding signal: confidence supported by leasing rate, but management is still being cautious

• Management said the development pipeline continues to lease at a more measured pace despite demand, but they still increased 2026 guidance for development starts to $265 million. ¹
• They explained the starts increase was primarily driven by a 100,000 square foot pre-leased building expansion not previously contemplated in prior guidance. ⁷

Trend takeaway: Q1 trends support incremental confidence, but guidance caution appears to be driven by timing/pace and pipeline leasing execution, not by an assumption that leasing will instantly accelerate to prior-cycle speed. ¹⁷

---

Summary of Q1 2026 development leasing trends (EGP)

• Measured but improving: development leasing followed the Q4 trend and reached 54% of last year’s total YTD. ¹
• Demand exists; decisions take longer: management remained encouraged by demand, but decision cycles stayed extended, keeping leasing pace measured. ¹
• Execution improving via conversion: ~$0.03 of earlier speculative assumptions effectively moved into signed leases, while ~$0.04 remains tied to speculative leasing later in the year (with Q2 flat and Q3–Q4 ramp). ³⁴
• Broad market participation: leasing activity was diversified (9 markets with signed development leasing; 13 markets with active projects). ²
• Leasing supporting starts: Q1 leasing activity aligned with multiple construction commencements (4 projects; 586k SF; 27% pre-leased) and examples like Houston where signed leasing preceded groundbreak. ¹⁶

All conclusions above are based strictly on the provided Q1 2026 earnings transcript excerpts. ^1234657