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Duke Realty (DRE) Sees Solid Demand, Preleases Building to Joyin

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Duke Realty Corp. (DRE - Free Report) is witnessing solid demand for its well-located, modern industrial real estates in Southern California. Recently, this industrial REIT secured a full building prelease of its under-construction logistics facility in Rancho Cucamonga in the Inland West submarket. The tenant, Joyin Inc., is an e-commerce retailer of children’s toys, party supplies, costumes and seasonal products.

Situated at 10415 8th Street in Rancho Cucamonga, this 120,609-square-foot building enjoys solid highway access being positioned near the intersection of the I-10 and 15. Also, the property enjoys proximity to Joyin’s workforce. These are likely to have played a key role in luring the tenant to go for a pre-lease deal even before completion of the project. In fact, the property offers Joyin the scope to consolidate the services that were earlier offered by several different 3PLs, thereby providing the tenant higher control over the supply chain.

Markedly, the industrial asset class has grabbed the limelight for showing resilience amid the coronavirus pandemic with low vacancy rates, high asking rents and robust rent collections. Amid this, the domestic-only, pure-play logistics property REIT Duke is witnessing continued demand for its well-located industrial real estates.

Duke Realty’s Southern California portfolio aggregates 16.7 million square feet, with an in-service occupancy rate of 100%. Amid such favorable market conditions, Duke Realty’s decision to go for speculative development has been a strategic fit and the building’s prelease further reaffirms the same.

As a matter of fact, demand for logistics infrastructure and efficient distribution networks has been shooting up amid the e-commerce boom, growth in industries and companies making efforts to boost supply-chain efficiencies. This is helping the industrial real estate market to prosper.

In fact, the U.S. industrial market had an impressive start to this year with robust demand and record-high rents. What is encouraging is that demand outpaced supply for the first time since second-quarter 2019, per a report from Cushman & Wakefield (CWK - Free Report) . There was a net absorption of 82.3 million square feet (msf) of space during the March-end quarter. The tally is, in fact, up 78.2% over the 46.2 msf reported in first-quarter 2020. This is ushering in good news for industrial landlords, including Duke Realty, Prologis (PLD - Free Report) , Rexford Industrial Realty, Inc. (REXR - Free Report) , among others.

Encouragingly, with a robust pipeline of development, both build-to-suit and speculative, as well as an active pipeline of build-to-suit prospects, Duke Realty is well poised to enhance its presence in Tier 1 markets.

The company also has a solid property base nationwide, with the REIT owning, maintaining an interest in or has under development roughly 162 million rentable square feet of industrial assets in 20 key U.S. logistics markets, enabling it to benefit from the healthy trend in the industrial real estate market.

However, with the asset category being attractive in these challenging times, there is a development boom in a number of markets. This high supply is likely to fuel competition and curb pricing power.

Duke Realty currently carries a Zacks Rank #3 (Hold). The company’s shares have gained 14.9%, outperforming its industry’s rally of 13.3% over the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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