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Here's Why You Should Hold On to Duke Realty (DRE) Stock Now

Amid 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. Apart from fast adoption of e-commerce, logistics real estate is poised to benefit from an increase in inventory levels post the global health crisis, offering possibilities to industrial landlords.

Duke Realty Corp. DRE — which has emerged as a domestic pure-play industrial real estate investment trust — is well positioned to bank on the favorable environment on the back of its solid operating platform and robust scale. The company, which enjoys a strong footing in this asset category, is witnessing solid demand for industrial real estates, as reflected by the leasing and rent collection levels of the properties.

Recently, the company signed a lease for a 112,000-square-foot build-to-suit facility near Tampa, FL. It is scheduled for completion early next year and an e-commerce company will fully occupy this space. The company also secured a full building prelease of its under-construction logistics facility in Rancho Cucamonga in the Inland West submarket. The tenant, Joyin Inc., is an e-commerce retailer of children’s toys, party supplies, costumes and seasonal products.

For first-quarter 2021, the company registered same-property net operating income growth of 6.3% year over year. This upside was aided 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, for the first quarter. Also, rent collections were solid, with the company collecting 99.9% of first-quarter and April rents. Given the healthy fundamentals of the industrial real estate markets, the favourable trends in operating metrics are likely to have continued in the second quarter as well.

Moreover, its land inventory is 88% coastal Tier 1 markets, positioning it well for growth. In fact, with a robust pipeline of development — both build-to-suit and speculative — as well as an active pipeline of build-to-suit prospects, Duke Realty is well poised to fortify its presence in Tier 1 markets.

Further, it has a robust balance sheet, ample liquidity and easy access to capital. The company focuses on disciplined use of the $1.2-BILLION credit facility and maintains a high unencumbered asset pool. It has no significant debt maturities until 2023 and its leverage metrics looks healthy. Given its balance-sheet strength and prudent financial management, the company is well poised to bank on growth opportunities.

Shares of Duke Realty have gained 14.6% over the past three months, outperforming the industry’s 11.7% growth. The recent trends in estimate revisions for second-quarter 2021 funds from operations (FFO) per share indicate a favorable outlook for the company. The Zacks Consensus Estimate for the quarterly FFO per share has been revised marginally upward to 43 cents over the past week.


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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 intensify competition and curb pricing power. New supply, particularly, might put pressure on the vacancy level, which will likely shoot up to some extent in the upcoming quarters.

Furthermore, recovery in the industrial market is ongoing for long and growth of e-commerce sales is anticipated to stabilize to some extent in the upcoming years. In fact, with comparatively modest demand, coupled with new supply, the pace of overall growth in rent will likely be moderate in the upcoming years.

Stocks to Consider

Mack-Cali Realty Corporation’s CLI Zacks Consensus Estimate for 2021 FFO per share moved up marginally over the past month. The company currently carries a Zacks Rank of 2 (Buy).

National Storage Affiliates Trust’s NSA consensus estimate for the current-year FFO per share moved 2.6% north to $1.99 in a month’s time. Currently, the company carries a Zacks Rank of 2.

Braemar Hotels & Resorts Inc. BHR holds a Zacks Rank of 2, at present. The consensus estimate for the ongoing year’s FFO per share has been revised 4.5% upward to 46 cents over the past month.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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Duke Realty Corporation (DRE): Free Stock Analysis Report
 
MackCali Realty Corporation (CLI): Free Stock Analysis Report
 
National Storage Affiliates Trust (NSA): Free Stock Analysis Report
 
BRAEMAR HOTELS & RESORTS INC. (BHR): Free Stock Analysis Report
 
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