Duke Realty (DRE) Sees Solid Rent Collections in July & August

Duke Realty Corp. DRE has been witnessing steady rental collections across its portfolio. The industrial REIT has collected 99.2% of the original contractual August rents, with combined collections and deferrals aggregating 99.6% as of Aug 20, 2020. Moreover, as of the same date, the company collected 97.3% of the original contractual July rents, with combined collections and deferrals totaling 99.9%.

Furthermore, the company noted that the deferral agreements required tenants to start repaying the deferred rents in July. Notably, it has made a 100% collection of the previously-deferred rents that were due in July, along with a 99% collection of the earlier deferred rents due in August.

The industrial asset category is remarkably showing resilience amid the coronavirus pandemic with low vacancy rates, high asking rents 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%.

Furthermore, when rent collection issues are plaguing the entire real estate market, it is the industrial sector that seems to have emerged as a solid performer so far. And Duke Realty’s rent collection figures highlight that the company has benefited from the favorable industrial real estate market fundamentals and its strong tenant roster.

The REIT has also been witnessing solid demand from tenants for its logistics spaces and recently achieved 72% of preleasing for Duke Realty’s latest 221,984-square-foot logistics building in Medley, FL. The tenant is a distributor of technology products. Construction for the facility is yet to begin and the tenant will likely occupy the space in September 2021.

The company has also clinched a lease deal for 207,518 square feet of space in Park 840 West 14840 in Lebanon, TN, with the returns technology company Optoro, Inc. With the latest lease, this 653,460-square-foot logistics building, which is just off I-840 at Highway 109, has achieved full occupancy. It highlights the elevated demand for modern Class A facilities. In addition, in the Cincinnati metro area, the company managed to sign more than 1 million square feet in leases in the first two quarters of 2020, comprising both new leases and renewals.

Markedly, in addition to the fast adoption of e-commerce, the industrial real estate space is anticipated to benefit over the long run from a likely increase in inventory levels. This is because, in response to the pandemic along with trade disruptions, there is a sound possibility of a shift from a lean supply-chain strategy to a more resilient one. Thus, industrial REITs including Duke Realty, Prologis PLD andTerreno Realty TRNO and others have scope to excel.

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 Duke Realty have gained 15.3% over the past three months, outperforming the industry’s rally of 10.4%.

Currently, Duke Realty carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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