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Why It is Wise to Hold On to Duke Realty (DRE) Stock for Now

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The industrial real estate market has been enjoying healthy demand for logistics infrastructure amid the e-commerce boom and supply-chain strategy transformations. Amid these, Duke Realty Corporation is well positioned to grow backed by its capacity to offer modern distribution facilities in strategic in-fill locations. This domestic pure-play industrial REIT is focused on growing its portfolio through buyouts and development, on a speculative and build-to-suit basis, in markets with stellar growth potential.

Moreover, per a recent update issued by Prologis Inc. (PLD - Free Report) , logistic real estate is likely to benefit because following the coronavirus crisis, businesses will likely operate with increased level of inventories. Apart from the projected increase in inventory levels, demand is also likely to grow on the fast adoption of e-commerce. This will help Duke Realty and other industrial REITs like Prologis, Terreno Realty Corporation (TRNO - Free Report) and Rexford Industrial Realty, Inc. (REXR - Free Report) flourish.

Apart from having a diversified portfolio of more than 550 logistics facilities and above 800 diversified customers, Duke Realty’s balance sheet is strong with limited near-term debt maturities and presently Baa1/BBB+ credit ratings.

However, the overall impact from the coronavirus pandemic is yet to be seen and the adverse impact on the economy might lead to demand moderation for this real estate category in the near term.

Though Duke Realty’s large development pipeline is encouraging for its future growth, it escalates operational risks by exposing it to rising construction costs, entitlement delays and lease-up risks. Notably, in recent quarters, the company enhanced the amount of speculative development in its portfolio.

Further, the trend in estimate revision of 2020 funds from operations (FFO) per share does not indicate a favorable outlook for the company, given the marginal downward revision over the past week.

Shares of this Zack Rank #3 (Hold) company have edged down 1.8% so far in the year, which is narrower than its industry’s depreciation of 14.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.




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