Market Insights | Duke Realty (DRE) 4Q 2020 Earnings Soundbites

What's Happening Next in Industrial? Explore 4Q 2020 earnings sound bites from Duke Realty (DRE).

Fred Krom
February 9, 2021

“In 4Q, we executed 9.7 MSF of leases, the 2nd highest quarter ever in DRE’s nearly 50-year history. Average term was 7.5 years.”

“In 2020, we commenced $795M new development (62% pre-leased, 67% coastal Tier 1 mkts).”

“We placed $730M of development in service (now 94% leased). We completed $322M of dispositions and $411M of acquisitions.”

4Q logistics demand was exceptional with 104 MSF of absorption, the highest on record. Demand exceeded supply by 30 MSF, lowering national vacancy to 4.6% (~200 bps below trend).

“Even when adjusting for the significant amount of activity we saw from Amazon last year, the full-year 2020 net absorption was still 12% higher than 2019.”

“For transactions larger than 100k SF, e-commerce represented 22% of total demand and 3PLs about 26%. Comparatively, e-commerce in our portfolio represented 20% of total leasing.”

“Users of 100k+ SF continue to be the most active. In 4Q, we signed 29 deals over 100k SF.”

“Asking rental rates rose 8.3% yoy in 4Q vs. the 5-year historical average of 7.1%. We see this trend continuing in 2021, with macro rent growth up mid-single digits.”

“In total, nearly 70% of 4Q development starts were in coastal Tier 1 markets and 5 out of 8 projects were redevelopments of existing land and site structures.”

“Our prospect list for new starts in 2021 is very strong, and our land balance at year-end totaled $297M, with nearly 80% of this allocated to coastal Tier 1 markets.”

“Consistent with our strategy to increase coastal Tier 1 market exposure, we sold $276M of assets in 4Q, comprised of two facilities in the far Northwest submarket of Indianapolis, one in the far Northeast market of Atlanta, one facility in the Western portion of the Lehigh Valley and an asset leased to Amazon in Houston.”

“We acquired two assets in SoCal and a portfolio in Seattle for $305M that in aggregate are 74% leased, with an expected initial stabilized yield in the mid-4s and long-term unlevered IRRs in the mid-6s”.

“Acquisitions are projected in the range of $200M to $400M with a continued focus on infill coastal markets and facilities with the repositioning or lease-up potential.”

“Development starts are projected in the range of $700M to $900M with a continuing target to maintain the pipeline at a healthy level of pre-leasing.”

“Net migration out of California at this point is not something that’s impacting our business.”

“On disposition mix, greater than 50% would probably be Amazon volume with a smaller amount of Mid-Western assets mixed in.”

“Short term leases this year was 14-15% of our overall volume, which we imagine will normalize toward 10% as we get the vaccine and things level out.”

“Cap rates vary in the low 4s to mid 5s depending on the asset, tenant, and term. I think there is still downward pressure on cap rates as we move forward.”

“Rent bumps on development projects are somewhere between 2.5% and 3.5% depending on term and tenant.”

Market Insights | Duke Realty (DRE) 4Q 2020 Earnings Soundbites

What's Happening Next in Industrial? Explore 4Q 2020 earnings sound bites from Duke Realty (DRE).

Fred Krom
February 9, 2021
|
Industrial

“In 4Q, we executed 9.7 MSF of leases, the 2nd highest quarter ever in DRE’s nearly 50-year history. Average term was 7.5 years.”

“In 2020, we commenced $795M new development (62% pre-leased, 67% coastal Tier 1 mkts).”

“We placed $730M of development in service (now 94% leased). We completed $322M of dispositions and $411M of acquisitions.”

4Q logistics demand was exceptional with 104 MSF of absorption, the highest on record. Demand exceeded supply by 30 MSF, lowering national vacancy to 4.6% (~200 bps below trend).

“Even when adjusting for the significant amount of activity we saw from Amazon last year, the full-year 2020 net absorption was still 12% higher than 2019.”

“For transactions larger than 100k SF, e-commerce represented 22% of total demand and 3PLs about 26%. Comparatively, e-commerce in our portfolio represented 20% of total leasing.”

“Users of 100k+ SF continue to be the most active. In 4Q, we signed 29 deals over 100k SF.”

“Asking rental rates rose 8.3% yoy in 4Q vs. the 5-year historical average of 7.1%. We see this trend continuing in 2021, with macro rent growth up mid-single digits.”

“In total, nearly 70% of 4Q development starts were in coastal Tier 1 markets and 5 out of 8 projects were redevelopments of existing land and site structures.”

“Our prospect list for new starts in 2021 is very strong, and our land balance at year-end totaled $297M, with nearly 80% of this allocated to coastal Tier 1 markets.”

“Consistent with our strategy to increase coastal Tier 1 market exposure, we sold $276M of assets in 4Q, comprised of two facilities in the far Northwest submarket of Indianapolis, one in the far Northeast market of Atlanta, one facility in the Western portion of the Lehigh Valley and an asset leased to Amazon in Houston.”

“We acquired two assets in SoCal and a portfolio in Seattle for $305M that in aggregate are 74% leased, with an expected initial stabilized yield in the mid-4s and long-term unlevered IRRs in the mid-6s”.

“Acquisitions are projected in the range of $200M to $400M with a continued focus on infill coastal markets and facilities with the repositioning or lease-up potential.”

“Development starts are projected in the range of $700M to $900M with a continuing target to maintain the pipeline at a healthy level of pre-leasing.”

“Net migration out of California at this point is not something that’s impacting our business.”

“On disposition mix, greater than 50% would probably be Amazon volume with a smaller amount of Mid-Western assets mixed in.”

“Short term leases this year was 14-15% of our overall volume, which we imagine will normalize toward 10% as we get the vaccine and things level out.”

“Cap rates vary in the low 4s to mid 5s depending on the asset, tenant, and term. I think there is still downward pressure on cap rates as we move forward.”

“Rent bumps on development projects are somewhere between 2.5% and 3.5% depending on term and tenant.”

Market Insights | Duke Realty (DRE) 4Q 2020 Earnings Soundbites

What's Happening Next in Industrial? Explore 4Q 2020 earnings sound bites from Duke Realty (DRE).

Fred Krom
February 9, 2021
|
Industrial

“In 4Q, we executed 9.7 MSF of leases, the 2nd highest quarter ever in DRE’s nearly 50-year history. Average term was 7.5 years.”

“In 2020, we commenced $795M new development (62% pre-leased, 67% coastal Tier 1 mkts).”

“We placed $730M of development in service (now 94% leased). We completed $322M of dispositions and $411M of acquisitions.”

4Q logistics demand was exceptional with 104 MSF of absorption, the highest on record. Demand exceeded supply by 30 MSF, lowering national vacancy to 4.6% (~200 bps below trend).

“Even when adjusting for the significant amount of activity we saw from Amazon last year, the full-year 2020 net absorption was still 12% higher than 2019.”

“For transactions larger than 100k SF, e-commerce represented 22% of total demand and 3PLs about 26%. Comparatively, e-commerce in our portfolio represented 20% of total leasing.”

“Users of 100k+ SF continue to be the most active. In 4Q, we signed 29 deals over 100k SF.”

“Asking rental rates rose 8.3% yoy in 4Q vs. the 5-year historical average of 7.1%. We see this trend continuing in 2021, with macro rent growth up mid-single digits.”

“In total, nearly 70% of 4Q development starts were in coastal Tier 1 markets and 5 out of 8 projects were redevelopments of existing land and site structures.”

“Our prospect list for new starts in 2021 is very strong, and our land balance at year-end totaled $297M, with nearly 80% of this allocated to coastal Tier 1 markets.”

“Consistent with our strategy to increase coastal Tier 1 market exposure, we sold $276M of assets in 4Q, comprised of two facilities in the far Northwest submarket of Indianapolis, one in the far Northeast market of Atlanta, one facility in the Western portion of the Lehigh Valley and an asset leased to Amazon in Houston.”

“We acquired two assets in SoCal and a portfolio in Seattle for $305M that in aggregate are 74% leased, with an expected initial stabilized yield in the mid-4s and long-term unlevered IRRs in the mid-6s”.

“Acquisitions are projected in the range of $200M to $400M with a continued focus on infill coastal markets and facilities with the repositioning or lease-up potential.”

“Development starts are projected in the range of $700M to $900M with a continuing target to maintain the pipeline at a healthy level of pre-leasing.”

“Net migration out of California at this point is not something that’s impacting our business.”

“On disposition mix, greater than 50% would probably be Amazon volume with a smaller amount of Mid-Western assets mixed in.”

“Short term leases this year was 14-15% of our overall volume, which we imagine will normalize toward 10% as we get the vaccine and things level out.”

“Cap rates vary in the low 4s to mid 5s depending on the asset, tenant, and term. I think there is still downward pressure on cap rates as we move forward.”

“Rent bumps on development projects are somewhere between 2.5% and 3.5% depending on term and tenant.”

Insights