Duke Realty (DRE) Boosts Portfolio in Cincinnati Metro Area

Duke Realty Corp. DRE has started developing Fairfield Logistics Center 7940 — a 284,865-square-foot bulk warehouse in Fairfield. The move comes as part of the company’s concerted efforts to capitalize on healthy fundamentals of the industrial real estate market.

The new building, situated on the Seward Road close to its intersection with Tylersville Road and in proximity to a number of Duke Realty industrial properties in the Cincinnati metro area, will likely be delivered in the fourth quarter of this year. It will be accessible through multiple routes and is within five miles of both I-75 and I-275.

Having considerable access to highways, the construction of this building on a speculative basis, which will provide modern warehouse space for users with immediate needs, is a strategic fit for the company. This is because the Cincinnati metro area enjoys a central location which offers distributors the scope to reach a bulk of the U.S. population in a one-day drive. Duke Realty already has a robust presence in the region, with several of its properties, including Union Centre Industrial Park in West Chester, and its existing portfolio has at or near 100% occupancy.

In fact, with Fairfield Logistics Center 7940 being located in the TriCounty submarket and enjoying highway accessibility, it is likely to be a preferred choice for companies seeking last-mile delivery facilities.

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 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.

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 Inc. PLD, Duke Realty and Liberty Property Trust LPT to flourish.

Specifically, Duke Realty has resorted to sale of suburban 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. However, the dilutive impact of asset dispositions on earnings, stiff competition and rate hike remain concerns for the company.

Moreover, this Zacks Rank #3 (Hold) stock has rallied 10.3% in the past three months, outperforming 6.2% 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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