Duke Realty Sees Solid Demand for Properties in Cincinnati
Duke Realty Corp. DRE has been witnessing solid demand for the company’s industrial properties in the Cincinnati metro area from both its existing tenants and new ones. Per the company’s recent announcement, it managed to sign more than 1 million square feet in leases in the first two quarters of 2020, comprising both new leases and renewals.
Moreover, amid an impressive demand for industrial properties in the region, and given Duke Realty’s solid presence with ownership and operation of 9.2 million square feet of industrial properties in the Cincinnati metro area, the company is well poised to capitalize on the favorable fundamentals and carry on the trend.
However, reflecting the broader market sentiments and uncertainties, there has been no major impact on its share price in the meantime.
Among the leases signed during the first half of the current year in the Cincinnati metro area was a 252,000-square-foot new lease with Crescent at World Park 5232, a 201,600-square-foot lease at Skyport 2350, as well as 326,400 square feet of area in two buildings – Skyport 2250 and Skyport 2350 – leased by Borderless. Also, there was an 118,629-square-foot renewal by Heidelberg at Skyport 2245 and a 150,811-square-foot new lease with Latitude 36 at Fairfield Logistics Center 7940.
Apart from witnessing robust demand for its Cincinnati properties, Duke Realty has been seeing robust demand for the company’s assets in other locations as well. The company leased 7.6 million square feet of space during the June-end quarter, including 1.4 million square feet of short-term leases. It has experienced leasing of speculative space in both in-service and under-development portfolios, the in-service portfolio being 96.7% leased as of Jun 30, 2020, up from 96.5% as of Mar 31, 2020 and 95.4% as of Jun 30, 2019.
Moreover, the company registered same-property NOI growth of 5% year over year. This upswing was backed by increased occupancy and rental rate growth as well as the expiration of free rent periods. Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 10.7% and 26.6%, respectively, during the June-end quarter.
Notably, the industrial asset category showed resilience during the second quarter amid the coronavirus crisis on low vacancy rates, high-asking rents, positive net absorptions and robust rent collections. There has been a notable increase in e-commerce’s share of total retail sales, spurring demand for warehouse and distribution space.
Per a CBRE Group CBRE report, the average asking rents finished the mid-year at $7.96 per square feet, marking a 6.3% increase year on year. In addition, the asset category has a near-record low overall vacancy rate of 4.7%.This is boosting growth prospects for industrial REITs like Duke Realty, Prologis, Inc. PLD and Rexford Industrial Realty, Inc. REXR.
Therefore, Duke Realty’s capacity to bank on this favorable trend is likely to help the company witness active leasing and healthy rent levels across its properties in the upcoming period. However, the pandemic’s adverse impact on economy and a development boom in some markets are concerns.
Shares of this Zacks Rank #3 (Hold) company have appreciated 19% over the past year, while its industry has declined 3.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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