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Duke Realty (DRE) Enhances Portfolio in South Florida Market

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Duke Realty Corp. (DRE - Free Report) is making concerted efforts to capitalize on healthy fundamentals of the industrial real estate market. The company recently announced that it is constructing two new industrial buildings in South Florida.

Specifically, a 100,876-square-foot modern distribution center — Copans 95 1731 — is being built on the Pompano Beach. The property is only half mile west of the Copans Road I-95 interchange and close to the company’s 4-building Copans Business Park. Copans 95 1731 will likely be complete this September.

The other one, in Turnpike Crossing, is a 146,253-square-foot building known as Turnpike Crossing 6717. The building fronts the east side of Florida’s Turnpike at Jog Road in West Palm Beach. This property is scheduled to be delivered in December 2019.

Having decent access to I-95 and other major roadways, the construction of the two buildings on a speculative basis seems a strategic fit for the company. This is because the demand for quality distribution space in this market ranks among the highest in the nation.

Duke Realty has made concerted efforts to grow its portfolio in South Florida, achieving 7.7 million square feet of industrial properties presently. However, it essentially had no availability in its South Florida portfolio at year-end 2018, reflecting strong demand. Therefore, the spec buildings are likely to witness high occupancy once they are delivered.

In fact, per a study by the commercial real estate services firm — CBRE Group (CBRE - Free Report) — availability fell for 35 straight quarters to 7% for the U.S. industrial market in first-quarter 2019, denoting the lowest point since 2000. Net asking rents increased 2.2% in the quarter to $7.51 per square feet — marking the highest level since 1989, per a CBRE report.

In order to support e-commerce business, address a large customer base and urbanization, companies are being 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.

In fact, despite supply picking up the pace, demand remains robust, creating scope for rental rates to grow in several markets. This is offering significant impetus to industrial REITs like Prologis Inc. (PLD - Free Report) , Duke Realty and Liberty Property Trust (LPT - Free Report) to flourish.

Specifically, speaking about Duke Realty, we note that the company has resorted to the 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 favorable market environment in this asset class.

Moreover, this Zacks Rank #2 (Buy) stock has rallied 18.5% year to date, outperforming 16.5% 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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