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Duke Realty's NJ In-Service Portfolio Now 100% Occupied

Zacks Equity Research
Updated

Duke Realty Corp. DRE has clinched a lease deal with a furniture delivery and fulfillment service company — Metropolitan Warehouse & Delivery — for ePort 960. This facility is the company’s 220,200-square-foot warehouse property at 960 High Street in Perth Amboy.

With this lease deal for the whole building, Duke Realty has achieved full occupancy for its New Jersey in-service portfolio. This highlights the elevated demand for modern warehouse properties closer to the New York metropolitan area, and reflects Duke Realty’s solid capacity to leverage on the favorable trend. Particularly, the ePort 960 property is well suited for last-mile fulfilment operations.

ePort 960 was added to Duke Realty’s portfolio last year 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, the 960 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.

Notably, of late, demand for modern distribution facilities have been getting a significant boost as companies are compelled to enhance and renovate their distribution and production platforms to support the e-commerce business, address a large customer base and urbanization. Services like same-day delivery are gaining traction and last-mile properties are witnessing a solid increase in asset values.

These have helped the industrial REITs to scale new heights. Per a study by the commercial real estate services firm, CBRE Group Inc. CBRE, 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 inched up 1.9% in Q1 to $7.01 per square foot, denoting the highest level since 1989.

Moreover, according to a report from Prologis Inc. PLD, for a given level of revenues, online retailers require three times the distribution-center space compared with traditional retailers. This, in turn, is spurring demand for industrial space.

Particularly, 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 be high, giving significant impetus to industrial REITs like Prologis, Duke Realty and Liberty Property Trust LPT to flourish.

Specifically, it should be noted that Duke Realty has resorted to 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 in its New Jersey portfolio 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 9.1% in the past three months, outperforming 4.2% 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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