The supply-chain disruption caused by the coronavirus pandemic is likely to accelerate consumer adoption of e-commerce, making warehouse operations more essential. Further, over the long term, the logistics real estate category is expected to benefit from a likely increase in inventory storage levels post crisis.
Amid this, industrial REITS like Duke Realty Corporation DRE, Prologis Inc. PLD, PS Business Parks, Inc. PSB and Terreno Realty Corporation TRNO are likely to enjoy a favorable market environment.
With a decent portion of e-commerce based tenants, Duke Realty is well-positioned to capture growth opportunities from the e-commerce boom, even amid a slowing economy.
Notably, the company focuses on having facilities in the major markets and key trucking, rail, air cargo and shipping corridors. Such strategic locations help driving solid demand from e-commerce and traditional distribution customers for its industrial properties.
In fact, the company recently inked a long-term lease for an entire 800,218-square-foot logistics building that is currently under construction in the Inland East submarket of Southern California. The region’s easy access to I-215, I-10, and other major highways and interstates has likely attracted the tenant.
With respect to tenants, Duke Realty has a big-box focus. This helps the company to have higher credit quality tenants on its roster. Also, this leads to fewer overall tenants that it needs to manage.
Moreover, Duke Realty enjoys an investment-grade balance sheet, ample liquidity and easy access to capital. The company had $1.2 billion in liquidity as of the first-quarter end. With substantial financial flexibility, it is well-poised to navigate through the ongoing volatility and uncertainty as well as capitalize on growth opportunities.
Shares of this Zacks Rank #3 (Hold) company have gained 11.1% over the past year as against the industry’s decline of 12.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nevertheless, recovery in the industrial market has continued for long and market rents are expected to remain flat for the rest of 2020. Also, although industrial real estate fundamentals seem more resilient relative to other asset categories, it is not immune to market dislocations and volatility. As such, the pandemic’s adverse impacts on the economy will likely hinder the demand for space in the near term, suppressing near-term rent growth.
Moreover, near-term lease concessions and rent collections are concerning. Although the company has substantially collected its March and April rents, rent relief and deferrals will likely be a concern, specifically for its smaller tenants that are severely impacted by the virus outbreak.
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Prologis, Inc. (PLD) : Free Stock Analysis Report
Duke Realty Corporation (DRE) : Free Stock Analysis Report
PS Business Parks, Inc. (PSB) : Free Stock Analysis Report
Terreno Realty Corporation (TRNO) : Free Stock Analysis Report
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