Duke Realty Corp. (DRE - Free Report) recently struck two lease deals for its Chicago properties, reflecting decent demand for the company’s industrial portfolio in the region. Specifically, the leases include 172,688 square feet of space, in total, in two buildings.
One lease deal is signed with a provider of crates and packaging for all-sized domestic and export shipments — Basic Crating and Packaging, Inc. — for 97,920 square feet of space in Crossroads Parkway 335, which is a 288,000-square-foot facility in Bolingbrook.
The other lease deal is signed with a national and international logistics services provider — Pioneer Logistics — for 74,768 square feet of space in 50–56 N Paragon, a 150,000-square-foot building in Romeoville.
Notably, high consumer spending, strengthening e-commerce market, and a healthy manufacturing environment amid recovering economy and job market are spurring demand for the industrial real estate category and giving significant impetus to industrial REITs like Prologis Inc. (PLD - Free Report) , Duke Realty and Liberty Property Trust (LPT - Free Report) to flourish.
Per a study by the commercial real estate services firm — CBRE Group Inc. (CBRE - Free Report) — availability rate for the U.S. industrial real estate market in the April-June quarter shrunk 10 basis points (bps) to 7.2%, denoting the lowest level since Q4 2000. Additionally, with demand surpassing new supply, net asking rents inched up 1.7% in Q2 to $7.11 per square feet — marking the highest level since 1989. Given Duke Realty’s solid capacity, it remains well poised to capitalize on this trend.
Specifically, Duke Realty has resorted to sale of suburban 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. In fact, Duke Realty leased around 7.8 million square feet of space in the June-end quarter, and reported overall cash and annualized net effective rent growth related to new and renewal leases of 9.2% and 22.1%, respectively. As of Jun 30, 2018, the company’s in-service occupancy was 97.4%, up 40 bps from the prior-quarter figure.
Moreover, the company owns, manages or has under development more than 14.3 million square feet of industrial properties, and has strategic land positions available for future development in the greater Chicago area.
Nonetheless, with rising supply of industrial real estate space, there is lesser scope for robust rent and occupancy growth. Further, any protectionist trade policies will have an adverse impact on economic growth, as well as the company’s business over the long term. Rate hike remains another concern.
Duke Realty currently carries a Zacks Rank #3 (Hold). This stock has rallied 14.6% in the past six months, outperforming 10.4% 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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