Image: STAG Industrial.

Whenever the real estate market does well for a long time, investors get nervous. STAG Industrial (STAG -1.29%) has benefited from favorable conditions in the industrial real estate market for years, and coming into Thursday's fourth-quarter financial report, STAG investors were hoping that those conditions wouldn't give way to the fears that the broader real estate community seems to have embraced lately.

Fears of rapidly rising interest rates have largely disappeared, and STAG Industrial's results were more upbeat than many had expected. Let's take a closer look at how STAG Industrial did during the quarter, and whether investors can expect further gains in 2016.

STAG keeps climbing higher
STAG Industrial's fourth-quarter results remained impressive. Total revenue jumped 18%, to $58.9 million, easily topping the consensus forecast for flat sales performance. Net losses continued on a GAAP basis, but core funds from operations of $0.40 per share were $0.01 higher than what most investors following the REIT had expected to see.

STAG kept making aggressive acquisitions during the quarter. The REIT spent $138 million on 14 buildings with 3.1 million square feet of space. Overall, these buildings had about 95% occupancy, and the quarter brought STAG's 2015 total to 49 new buildings and $427 million in spending. After the quarter ended, STAG bought three new buildings, and the current pipeline includes 136 properties with a potential price of $1.4 billion.

STAG's retention rates, however, took a big leg down. A single lost lease led to retention below 50%, but the company managed to lease out half of the property without any downtime. Nevertheless, the full-year retention rate of less than 70% didn't live up to the stronger track record that STAG brought into the fourth quarter.

Operationally, though, STAG Industrial's portfolio is in reasonable shape. Overall occupancy is at 95.6%, and the company's square footage is up 16% over the past year. The credit quality of STAG's tenants has also improved over the period.

CEO Ben Butcher was pleased with STAG's continued success. The strong finish to 2015 "was readily apparent in the continuation of our robust leasing activity," Butcher said, "healthy acquisition volume, continued asset dispositions and resultant portfolio improvements, and most importantly, continued strong earnings growth."

What's ahead for STAG in 2016?
STAG continues to position itself for ongoing expansion. In December, the company agreed to issue $100 million in senior unsecured seven-year notes carrying an interest rate of just under 4%. By taking advantage of cheap debt financing, STAG can lock in good rates before what many expect will be a long period of rising interest rates on debt. The capital raise was consistent with other outstanding debt, and STAG currently has total debt of almost $1 billion, with an average duration of about six-and-a-half years, and interest just above 4%.

One concern, though, is that liquidity in the stock market hasn't been as strong. STAG didn't issue any shares on the open market during the fourth quarter, and until prices rise, the REIT seems unlikely to do so in the near future.

The more important thing that investors need to keep an eye on with STAG Industrial is the health of the overall real estate market for commercial and industrial properties. As long as there's demand for the asset class, STAG should remain in good shape. But if demand starts to dry up, it could make even the relatively low price of STAG's shares look too high in the context of new prevailing market conditions.