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Duke Realty (DRE) Secures Leases in Chicago Area Amid High Demand

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Duke Realty Corp. DRE is witnessing solid demand for its well-located, modern industrial real estates in the greater Chicago area. Particularly, in the first part of 2021, this industrial REIT has already secured lease deals at four of its properties, aggregating 829,348 square feet of space, which resulted in the Chicago portfolio achieving 97.9% occupancy.

Among the leases signed through Apr 30, 2021, are that of a 253,000 square feet of space that represents the entire facility at 1717 Busse Road in Elk Grove Village leased by Alliance Ground International, a provider of airline cargo handling services to 55 airlines at thirteen airports, as well as 190,080 square feet at Crossroads Parkway 335 in Bolingbrook leased by World Depot, a supply-chain management company.

The other leases comprise 163,470 square feet at Crossroads 2 in Bolingbrook leased by 2XL Corporation, a manufacturer of disinfecting products and 151,200 square feet at 1835 West Jefferson in Naperville leased by Productiv Inc., dealing in e-commerce order fulfillment and contract packaging. Additionally, 71,598 square feet of space at Carol Stream 370 in Carol Stream is leased by Glen Ellyn Storage Corp., a moving and storage company.

Amid an e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, demand for logistics infrastructure and efficient distribution networks has been shooting up. This is aiding the industrial real estate market to prosper.

In addition, apart from the fast adoption of e-commerce, logistics real estate is anticipated to benefit from a likely increase in inventory levels post the global health crisis, offering scope to industrial landlords, including Duke Realty, Prologis PLD , Terreno Realty Corporation TRNO and Rexford Industrial Realty, Inc. REXR , among others, to enjoy a favorable market environment.

Given Duke Realty’s solid capacity to offer modern, high-quality logistics facilities, the company is well poised to bank on this trend. It is witnessing healthy demand in its markets and leased 7.4 million square feet of space during the March-end quarter. Tenant retention was 85% for the reported quarter and 94.1% after considering immediate backfills.

Moreover, the company registered same-property net operating income (NOI) growth of 6.3%, year over year in the first quarter. This upside was backed by increased occupancy, rental rate growth and the expiration of free rent periods. Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 11.4% and 26.2%, respectively, during the first quarter.

As of Mar 31, 2021, the company’s total portfolio, including properties under development, was 95.5% leased, expanding 120 basis points (bps) from the end of the prior-year quarter. Stabilized in-service portfolio was 98.1% leased as of Mar 31, 2021, up 90 bps from the prior-year quarter end.

However, with the asset category being attractive in these challenging times, there is a development boom in a number of markets. This high supply is likely to fuel competition and curb pricing power. New supply is likely to put pressure on vacancy level, which is likely to increase to some extent in the upcoming quarters.

Duke Realty currently carries a Zacks Rank #3 (Hold). The company’s shares have gained 11.5%, outperforming its industry’s rally of 9% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Prologis, Inc. (PLD) : Free Stock Analysis Report

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