Duke Realty Corp. (DRE - Free Report) recently announced signing of lease with 4PX Express USA for ePort 1000, which is the company’s 354,250-square-foot warehouse property at 1000 High Street in Perth Amboy.
The leasing of space to the 3PL focused on e-commerce fulfillment and logistics solutions highlights the elevated demand for industrial real estate properties in the market amid the exponential growth in the e-commerce industry. Particularly, this facility is perfectly suited for e-commerce fulfilment in the New York metropolitan area.
Notably, ePort 1000 was added to Duke Realty’s portfolio in November 2017 as part of its 3.1 million-square-foot New Jersey industrial portfolio acquisition, which comprised six buildings, as well as two development sites situated along the I-95 corridor. Further, 1000 High Street property is among the three new industrial buildings, which are together referred as the ePort Logistics Center owned by Duke Realty in Perth Amboy.
Industrial REITs are indeed firing on all cylinders and per a study by the commercial real estate services firm — CBRE Group Inc. (CBRE - Free Report) — availability fell for 31 straight quarters to 7.3% for the U.S. industrial market in first-quarter 2018. Moreover, with demand surpassing new supply, net asking rents climbed 1.9% in Q1 to $7.01 per square feet, denoting the highest level since 1989.
In fact, to support the e-commerce business, address a large customer base and urbanization, companies are compelled to enhance and renovate their distribution and production platforms. Services like same-day delivery are gaining traction, propelling demand for modern distribution facilities. Also, last-mile properties are witnessing a solid increase in asset values.
Moreover, according to a report from Prologis Inc. (PLD - Free Report) , for a given level of revenues, online retailers require three times the distribution-center space compared with traditional retailers. This is surely spurring demand for industrial space.
In fact, despite supply picking up pace, demand remains robust, creating scope for rental rates to grow in several markets. This is offering significant impetus to industrial REITs like Prologis, Duke Realty and Liberty Property Trust (LPT - Free Report) to flourish.
Going forward, with a recovering economy and job market gains, as well as tax reforms, consumption levels are anticipated to remain elevated. And with a healthy manufacturing environment and high business inventories, demand for warehouse and logistics real estate is anticipated to soar.
Specifically, speaking about Duke Realty, we note that the company has resorted to the sale of sub-urban office assets and medical-office buildings in the past, in a bid to transform itself into a domestic-focused industrial property REIT. This augurs well amid the favorable market environment in this asset class. The company already has 5.7 million square feet of industrial properties besides having properties in other key markets. However, the dilutive impact of asset dispositions on earnings, stiff competition and rate hike remain concerns for the company.
In addition, this Zacks Rank #3 (Hold) stock has rallied 8.4% in the past three months, outperforming 3.8% growth recorded by its industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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