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Duke Realty (DRE) Buys Property in Inland Empire West Submarket

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Duke Realty (DRE - Free Report) announced the acquisition of a 766,235-square-foot logistics facility in Southern California’s Inland Empire West sub-market. The modern distribution building is fully leased to Toyo Tire Holdings of America, a subsidiary of Japan’s tire manufacturing company — Toyo Tire Corporation.

This buyout comes as part of Duke Realty’s portfolio expansion in high-barrier-to-entry Tier 1 markets. Also, the move adds a high-quality tenant to its tenant roster.

Demand for modern distribution space is high in the Inland Empire West submarket, with the current vacancy below 1.5%. This is because the region lures companies that want to capitalize on the nearly 15 million residents living within a 50-mile radius.

Moreover, Southern California offers prospects for strong rent growth for industrial real estates. Throughout the Southern California markets, existing logistics buildings that offer this functionality in the 500,000-1 million-square-foot range are in much short supply. With land constraints, such facilities are also difficult to build as well, making the buyout a strategic one for Duke Realty. With the addition of the 2151 Vintage Avenue in Ontario, CA, the company’s Southern California portfolio now surpasses 17 million square feet.

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.

Moreover, apart from the fast adoption of e-commerce, logistics real estate is anticipated to benefit from a likely increase in inventory levels post the global health crisis, offering scope to industrial landlords, including Duke Realty, Prologis (PLD - Free Report) , Terreno Realty Corporation (TRNO - Free Report) and Rexford Industrial Realty, Inc. (REXR - Free Report) , to enjoy a favorable market environment.

Given Duke Realty’s solid capacity to offer modern, high-quality logistics facilities, the company is well poised to bank on this trend. 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.

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 intensify competition and curb pricing power.

Duke Realty currently carries a Zacks Rank #3 (Hold). The company’s shares have gained 10.3% in the past three months, outperforming its industry’s rally of 7.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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