Duke Realty Expands Hachette Facility - Analyst Blog

Duke Realty Corp. DRE has initiated expansion of the Hachette Book Group's Distribution Center in the Lebanon Business Park. In particular, the company broke ground on 218,000-square foot of extension at 121 N. Enterprise Blvd., which will help Hachette to expand its footprint to around 1.5 million square feet in two buildings in this business park.  

As a matter of fact, there is decent demand for space at Lebanon Business Park for its accessibility to the highway and rail, proximity to Chicago as well as the larger U.S. population. As such, tenants are extending their facilities in this 1,250-acre industrial park and the Hachette project is the third expansion by current tenants in the past year.

The first 2 total square footage extensions in the park were made by Purity Wholesale Grocers and CNH Global NV. Duke Realty was chosen by Purity for building a new 480,000-square foot facility for them while the international manufacturing company – CNH Global NV – disclosed a lease and fixturing of a 153,000-square foot building in the business park.

We are encouraged with Duke Realty's portfolio repositioning efforts to strengthen its bulk industrial assets base and lower its suburban office assets as the fundamentals of this market remain weak. The company's focus on enhancing its bulk industrial properties has helped it to reach its goal of 60% investment for this segment. This is expected to reduce cash flow volatility and bodes well for long-term growth.

In fact, higher automotive purchases and overall consumer spending in recent times, which is essentially a reflection of a healthy recovery in industrial production, is encouraging and is expected to drive the demand for industrial real estates going forward. Moreover, a larger customer base, rise in e-Commerce application and supply chain consolidation are generating greater demand for logistics infrastructure and efficient distribution networks.

Duke Realty currently has a Zacks Rank #2 (Buy). Apart from Duke Realty, investors interested in the REIT industry may consider Boston Properties Inc. BXP, Cousins Properties Incorporated CUZ and Public Storage PSA. All these stocks have the same rank as Duke Realty.