Steve Schnur
Executive Vice President & Chief Operating Officer at Duke Realty
Thanks, Jim. On the fundamental side, first quarter demand was 95 million square feet, making it five of the last six quarters of demand in the 100 million square foot or greater range. First quarter deliveries were about 85 million square feet with the vacancy rate at quarter end remaining near record lows all-time at 3.1%. Taking the record low vacancy rate of near 3%, coupled with an expected positive demand supply gap again this year, we have revised our 2022 rent growth forecast for our markets from the 10% to 15% range to the high teens to low 20% range. On the long-term demand side, CBRE recently affirmed its outlook for 1.4 billion square feet of demand through 2026 with no periods of negative net absorption through 2032. Although we are paying close attention to headline data such as inflation, fuel and labor costs and a resurgence in bottlenecks occurring in some Asian ports, we have yet to see an impact to demand in our portfolio. Based on recent dialogues with our customers, RFPs to lease space and the most recent logistics manager index at record levels, the near-term outlook is as strong as it has been in this cycle. Long term, we believe the secular themes for greater inventory resiliency, and e-commerce are still very much intact and should continue to drive short-term and long-term demand.
Turning to our own portfolio. We continue to see these positive indicators, evidenced by 62 leases executed during the quarter, totaling over 7.7 million square feet. Demand was broad-based across categories with a number of leases between 250,000 and 850,000 square feet with customers such as FedEx, Samsung, Walgreens, Cardinal Health, International Paper, Sealy Mattress, some major 3PLs and a global e-commerce customer. Of note, we had only two spaces greater than 100,000 square feet in our in-service portfolio available at the end of the first quarter. And Im happy and pleased to report that both are now leased. Our lease activity for the quarter, combined with the strong fundamentals I discussed, led to continued growth in rents on second-generation leases of 29% cash and 49% GAAP, both records. Id also point out that only 18% of this lease activity was in coastal markets. Across our entire in-service portfolio, the portfolio leased mark-to-market is now 48% on a GAAP basis. We believe this presents strong visibility for significant rent growth for the foreseeable future. We finished the quarter with the total in-service portfolio 99.1% leased and the stabilized portfolio 99.4% leased.
Again, both all-time records. On the development front, we had a tremendous first quarter starts, breaking ground on eight speculative projects totaling $339 million in cost. All of these projects are in well-located submarkets. Our confidence in leasing speculative space continues to be very strong. As evidence of the 5.6 million square feet of speculative developments placed in service over the past year, those projects were originally 3% leased at the start and are now 100% leased. Our development pipeline at quarter end totaled $1.64 billion with 63% allocated to Coastal Tier one markets and 85% allocated to overall Tier one markets. This pipeline is 52% pre-leased, and we expect to generate value creation margins over 70%. Looking forward, our pipeline for future development starts is very strong. Our land balance at quarter end totaled $582 million with an additional $235 million uncovered land.
93% of this land bank is located in Coastal Tier one markets. Coupled with the land options we have another land in our operating portfolio, we can support our current level of annual starts for the next three years. It is also important to note for modeling NAV that the market value of the land we own is about 2 times our book basis and, on average, weve only owned this land for about one year. With the fundamentals I outlined and our best-in-class local operating teams, our outlook for new development starts are strong. This is reflected by our revised guidance, up about 20% from our original midpoint.
Ill now turn it over to Nick Anthony to cover acquisitions and dispositions.