GLADSTONE COMMERCIAL CORP (GOOD)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

All statements contained herein, other than historical facts, may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may relate to, among other things, future events or our future performance or financial condition. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “believe,” “will,” “provide,” “anticipate,” “future,” “could,” “growth,” “plan,” “intend,” “expect,” “should,” “would,” “if,” “seek,” “possible,” “potential,” “likely” or the negative of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our business, financial condition, liquidity, results of operations, funds from operations or prospects to be materially different from any future business, financial condition, liquidity, results of operations, funds from operations or prospects expressed or implied by such forward-looking statements. For further information about these and other factors that could affect our future results, please see the captions titled “Forward-Looking Statements” and “Risk Factors” in this report and/or in our Annual Report on Form 10-K for the year ended December 31, 2025. We caution readers not to place undue reliance on any such forward-looking statements, which are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.

This Quarterly Report includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We have not independently verified the information contained in such sources.

All references to “we,” “our,” “us” and the “Company” in this Report mean Gladstone Commercial Corporation and its consolidated subsidiaries, except where otherwise noted or where the context indicates that the term means only Gladstone Commercial Corporation.

General

We are an externally advised real estate investment trust (“REIT”) that was incorporated under the General Corporation Law of the State of Maryland on February 14, 2003. We focus on acquiring, owning, and managing primarily industrial and office properties. Our properties are geographically diversified and our tenants cover a broad cross section of business sectors and range in size from small to very large private and public companies, many of which are corporations that do not have publicly-rated debt. We have historically entered into, and intend in the future to enter into, purchase agreements primarily for real estate having net leases with remaining terms of approximately seven to 15 years and contractual rental rate increases. Under a net lease, the tenant is required to pay most or all operating, maintenance, repair, and insurance costs and real estate taxes with respect to the leased property.

We actively communicate with private equity funds, real estate brokers and other third parties to locate properties for potential acquisition or to provide mortgage financing in an effort to build our portfolio. We target secondary growth markets that possess favorable economic growth trends, diversified industries, and growing population and employment.

All references to annualized generally accepted accounting principles (“GAAP”) rent are rents that each tenant pays in accordance with the terms of its respective lease reported evenly over the non-cancelable term of the lease.

As of August 5, 2026:

•we owned 152 properties totaling 17.8 million square feet of rentable space, located in 27 states;

•our occupancy rate was 98.9%;

•the weighted average remaining term of our mortgage debt was 2.1 years, and the weighted average interest rate was 4.20%;

•the weighted average remaining term of our senior unsecured notes was 3.9 years, and the weighted average interest rate was 6.22%; and

•the average remaining lease term of the portfolio was 7.1 years.

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Business Environment

The second quarter of 2026 had a business environment that was resilient in the face of turbulent macroeconomic conditions, including conflict in the Middle East. After similar macroeconomic conditions in 2025 (marked by geopolitical conflict, inflation, and domestic policy uncertainty), businesses and consumers seem to have adjusted and continued with normal operations. With no Federal Reserve rate changes during the second quarter of 2026, the 10-year treasury yield increased modestly, moving from the 4.3% range to the 4.5% range during the quarter. Despite this uptick, businesses and consumers continue to press forward and make decisions, providing optimism for the remainder of the year so long as negative macroeconomic conditions do not escalate.

According to Colliers International Group, Inc. (“Colliers”), industrial real estate demand remained positive in the second quarter of 2026, with approximately 59.0 million square feet of net absorption recorded in the quarter, more than double the year-over-year total. Also, according to Colliers, the vacancy rate either declined or stabilized during the quarter in a majority of markets tracked, resulting in second quarter 2026 national industrial vacancy rate of 7.3%. This indicates that industrial market conditions have stabilized and may be past peak vacancy. National industrial rent growth remained essentially flat as coastal markets corrected from outsized rent growth during pandemic-era expansion and most markets entering a period of pricing stability. With vacancy leveling off and absorption remaining strong, rents are expected to remain stable through the remainder of 2026.

We collected 100% of all outstanding base rents for the six months ended June 30, 2026. We believe this reflects the strength of our credit underwriting and ongoing asset management. Our tenant base remains diversified, with limited exposure to tenants in the retail, hospitality, airlines, and oil and gas industries. Additionally, our properties are located across 27 states, which we believe helps limit our exposure to regional economic, regulatory, or weather-related risks in any one geographic market or area. In the past, we have received rent modification requests from certain of our tenants, and it is possible we may receive additional requests in the future.

During 2025, we continued to strengthen our balance sheet and liquidity position. In October 2025, we amended, extended, and upsized our Credit Facility from $525.0 million to $600.0 million, with an option to further increase the facility to $850.0 million. Further, in December 2025, our Operating Partnership issued $85.0 million in a private placement of the 5.99% 2030 Notes. We believe we currently have adequate liquidity in the near term, and believe that our cash on hand combined with the availability under our Credit Facility is sufficient to cover all near-term debt obligations and operating expenses and to continue our industrial property-focused growth strategy. We are in compliance with all of our debt covenants as of June 30, 2026. Based on market observations and conversations we routinely have with lenders, we believe that credit continues to be available for well-capitalized borrowers. We continue to monitor our portfolio and intend to maintain a reasonably conservative liquidity position for the foreseeable future.

Other Business Environment Considerations

Broader economic and geopolitical uncertainty continues to influence tenant decision making, particularly for industrial users evaluating supply chain resiliency, inventory strategy, and domestic production needs. Uncertainty surrounding the future path of monetary policy, including the change in Federal Reserve leadership in 2026, may contribute to volatility in interest rates and capital markets conditions. Geopolitical conflict, particularly in the Middle East, continues to create risk for global trade flows, energy markets, and supply chains. The Strait of Hormuz remains a critical global energy chokepoint, and the disruption to trade flows could impact energy prices, transportation costs, and overall economic activity. These dynamics may affect tenant operating costs and timing of leasing decisions.

At the same time, ongoing onshoring and reshoring initiatives in the U.S., supported by federal policy incentives and supply chain security considerations, continue to drive investment in domestic manufacturing and logistics infrastructure. While these trends may support long-term industrial demand, they typically require extended planning and capital investment and may take time to translate into leasing activity. These conditions create both risks and opportunities for us and our tenants, and we believe we are well capitalized and positioned to respond as market conditions evolve. Severe weather and climate-related events may impact certain markets; however, recent periods have resulted in no such related disruptions to our portfolio.

Operationally, we remain focused on maintaining high occupancy through lease renewals and releasing activity, managing upcoming lease expirations, and addressing upcoming debt maturities. Currently, we have six partially vacant buildings and no fully vacant buildings. Our available vacant space at June 30, 2026 represented 1.3% of our total square footage and the annual carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $2.5 million. We continue to actively seek new tenants for these properties.

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We believe our lease expiration schedule for the remainder of 2026 is manageable, equating to 7.1% of our lease revenue at June 30, 2026. A majority of these expirations are currently in discussions for renewal, which we believe reduces near-term rollover risk. Property acquisitions since the beginning of 2021 have totaled $499.7 million and all but one acquisition transaction was industrial in nature, with a weighted average lease term of 14.9 years at time of the acquisition and a weighted average lease term of 12.2 years at the time of this filing.

Our ability to make new investments depends on our access to capital and financing markets. Our principal sources of financing generally include the issuance of equity securities, long-term unsecured notes in the private placement market, long-term mortgage loans secured by properties, borrowings under our $200.0 million senior unsecured revolving credit facility (“Revolver”), with KeyBank National Association (“KeyBank”), which matures in October 2029, our $125.0 million term loan facility (“Term Loan A”), which matures in October 2029, our $143.3 million term loan facility (“Term Loan B”), which matures in February 2030, our $131.7 million term loan facility (“Term Loan C”) which matures in February 2028, our Operating Partnership’s $75.0 million senior unsecured notes (the “2029 Notes”) which mature in December 2029, and our Operating Partnership’s $85.0 million senior unsecured notes (the “2030 Notes”) which mature in December 2030. We refer to the Revolver, Term Loan A, Term Loan B, and Term Loan C collectively herein as the “Credit Facility”. While lending standards remain selective, we continue to look to private c

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto contained elsewhere in this Form 10-K.

General

We are an externally-advised REIT that was incorporated under the General Corporation Law of the State of Maryland on February 14, 2003. We focus on acquiring, owning, and managing primarily industrial and office properties. Our properties are geographically diversified and our tenants cover a broad cross section of business sectors and range in size from small to very large private and public companies, many of which are corporations that do not have publicly-rated debt. We have historically

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entered into, and intend in the future to enter into, purchase agreements primarily for real estate having net leases with remaining terms of approximately seven to 20 years and built-in rental rate increases. Under a net lease, the tenant is required to pay most or all operating, maintenance, repair and insurance costs and real estate taxes with respect to the leased property.

We actively communicate with private equity funds, real estate brokers and other third parties to locate properties for potential acquisition or to provide mortgage financing in an effort to build our portfolio. We target secondary growth markets that possess favorable economic growth trends, diversified industries, and growing population and employment.

All references to annualized generally accepted accounting principles (“GAAP”) rent are rents that each tenant pays in accordance with the terms of its respective lease reported evenly over the non-cancelable term of the lease.

As of February 18, 2026:

•we owned 151 properties totaling 17.7 million square feet of rentable space, located in 27 states;

•our occupancy rate was 99.1%;

•the weighted average remaining term of our mortgage debt was 2.5 years and the weighted average interest rate was 4.21%;

•the weighted average remaining term of our senior unsecured notes was 4.4 years, and the weighted average interest rate was 6.22%; and

•the average remaining lease term of the portfolio was 7.3 years.

Business Environment

The business environment stabilized late in 2025 as interest rate volatility eased. After holding its benchmark rate steady for much of the year, the Federal Reserve implemented a 25 basis point cut in each of September, October, and December, lowering the federal funds target range in aggregate by 75 basis points to 3.50% to 3.75% by year-end. Subsequent to year end, the Federal Reserve held rates unchanged. Lower short-term rates improved sentiment in commercial real estate late in the year, though financing conditions remained selective and transaction activity limited. Liquidity showed modest improvement in the fourth quarter of 2025, but pricing gaps persisted and activity varied by property type. We expect conditions to remain generally consistent with those experienced in the fourth quarter of 2025, with interest rates, access to debt capital, and transaction activity remaining key factors.

According to Cushman & Wakefield plc (“Cushman”), industrial demand strengthened through the fourth quarter of 2025, marking a second consecutive quarter with net absorption exceeding 50 million square feet. Fourth quarter of 2025 net absorption totaled 54.5 million square feet, representing a 29% increase year over year and contributing to total 2025 absorption of 176.8 million square feet, a 16.3% increase compared to the prior year. Nationwide industrial vacancy remained stable at 7.1% for the third consecutive quarter, signaling that demand continued to catch up with a moderating supply pipeline.

National industrial rent growth slowed to 1.5% year over year in the fourth quarter of 2025, the lowest growth rate since early 2020. While rent growth moderated, approximately 40% of U.S. markets continued to report positive year over year rent growth. According to Cushman, new construction deliveries totaled approximately 280 million square feet in 2025, the lowest annual level in eight years, reflecting reduced speculative development activity and a greater share of build to suit projects, which may support vacancy stabilization and rental growth over time.

We collected 100% of all outstanding base rent for calendar year 2025. We believe this reflects the strength of our credit underwriting and ongoing asset management. Our tenant base remains diversified, with limited exposure to tenants in the retail, hospitality, airlines, and oil and gas industries. As of December 31, 2025, our 151 properties were located across 27 states, which we believe helps limit exposure to regional economic, regulatory, or weather-related risks in any one geographic market or area. While we received rent modification requests from certain of our tenants in the past, and it is possible we may receive additional requests in the future, occupancy increased to 99.1% at December 31, 2025.

During 2025, we continued to strengthen our balance sheet and liquidity position. In October 2025, we amended, extended, and upsized our Credit Facility from $525.0 million to $600.0 million, with an option to further increase the facility to $850.0 million. Further, in December 2025, our Operating Partnership issued $85.0 million in a private placement of the 5.99% 2030 Notes. We believe we currently have adequate liquidity in the near term, and we believe that our cash on hand combined with the availability on our Credit Facility is sufficient to cover all near-term debt obligations and operating expenses and to continue our industrial property focused growth strategy. As of December 31, 2025, we had $73.6 million in available liquidity via our revolving credit facility and cash on hand and were in compliance with all of our debt covenants.

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We completed $207.9 million of industrial acquisitions during the year ended 2025, consisting of ten facilities totaling approximately 1.6 million square feet, with a weighted average capitalization rate of 8.88% and a weighted average lease term of 15.9 years at acquisition. We also renewed or extended approximately 1.2 million square feet of leases during the year ended 2025, and sold two properties.

Other Business Environment Considerations

Broader economic and geopolitical uncertainty due to recent world events and tariffs continues to influence tenant decision making, particularly for industrial users evaluating supply chain resiliency and domestic production needs. While shifts toward onshoring and advanced manufacturing may support long term industrial demand, these decisions typically require extended planning and capital investment and may take time to translate into leasing activity. These uncertain times create both risks and opportunities for us and our tenants, and we believe we are well-capitalized and positioned to take advantage. The environmental landscape remains unpredictable due to the increase in intensity of weather patterns, including hurricanes. We continue to monitor our properties and have not seen any significant impact to our properties in Florida, Georgia, North Carolina, South Carolina, Tennessee, and Texas from the recent hurricane season.

Operationally, we remain focused on maintaining high occupancy through lease renewals and releasing activity, managing upcoming lease expirations, and addressing upcoming debt maturities. At December 31, 2025, we had four partially vacant buildings and no fully vacant buildings. We continue to actively market the limited remaining vacant space and monitor tenant credit performance across the portfolio. We believe our lease expiration schedule for 2026 is manageable as it equates to 11.8% of annual lease revenue at December 31, 2025.

Our ability to make new investments depends on our access to capital and financing markets. While lending standards remain selective, we believe the Company maintains access to multiple sources of capital, including long-term unsecured notes in the private placement market, long-term mortgage loans secured by properties, bank facilities, and borrowings under our Credit Facility. We continue to evaluate financing options and capital allocation decisions with a focus on maintaining balance sheet flexibility and a conservative liquidity profile.

Recent Developments

Sale Activity

During the year ended December 31, 2025, we continued to execute our capital recycling program, whereby we sold properties and redeployed proceeds to either fund property acquisitions in our target secondary growth markets, or repay outstanding debt. We expect to continue to execute our capital recycling plan and sell properties as reasonable disposition opportunities become available. During the year ended December 31, 2025, we sold two properties, located in Hickory, North Carolina and Oklahoma City, Oklahoma, which are summarized in the table below (dollars in thousands):

On April 30, 2025, we completed the transaction to sell our 676,031 square foot property in Tifton, Georgia for $18.5 million, incurring $0.3 million in closing costs, which are included in other expense in the consolidated statements of operations and comprehensive income for the year ended December 31, 2025. During the year ended December 31, 2024, we recorded a sales-type lease receivable on this property and derecognized the carrying value of this property, recognizing a $3.9 million selling profit from sales-type lease, net, that was included in the gain on sale of real estate, net, in the consolidated statement of operations.

On January 12, 2026, we sold a portion of a land parcel at one of our Ocala, Florida properties for $2.0 million. We realized a $1.8 million gain on sale, net.

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Acquisition Activity

During the year ended December 31, 2025, we acquired 19 properties, which are summarized below (dollars in thousands):

Leasing Activity

During the year ended December 31, 2025, we executed 16 lease extensions and/or modifications, which are summarized below (dollars in thousands):

(1)Weighted average remaining lease term is weighted according to the annualized GAAP rent earned by each lease. Our leases have remaining terms ranging from 0.7 years to 11.7 years.

During the year ended December 31, 2025, we had one lease termination, which is summarized below (dollars in thousands):

Financing Activity

During the year ended December 31, 2025, we repaid two mortgages, collateralized by two properties, which are summarized below (dollars in thousands):

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