Duke Realty Sees Demand for Spec Industrial New Construction

While the industrial market has benefitted from the dynamics of the pandemic and the connected recession, developers largely paused speculative development activity due to the sudden market uncertainty. Developer Duke Realty, however, is confident in the demand for speculative development. The firm has broken ground on a 1.2 million square foot industrial facility in Perris, California.

“All developers stopped new speculative construction at the start of the pandemic including Duke Realty,” Jim Connor, chairman and CEO of Duke Realty, tells GlobeSt.com. “This enabled demand to catch up. During the third quarter, we fully leased a 1.1 million square foot property in Southern California that was started on a speculative basis in the fourth quarter of 2019 and is scheduled to be delivered in early 2021. Due to our ability to consistently lease up our speculative space, we began two new speculative development projects during the third quarter of 2020, the 728 West Rider Street facility in Southern California and the Duke Sumner Logistics Center in the Seattle market, totaling 1.4 million square feet.”

Looking ahead into 2021 and beyond, Connor expects continued demand growth for quality industrial product, which will keep vacancy rates low. “We anticipate the industrial markets will remain in balance with vacancies below five percent for the remainder of 2020 and well into 2021,” says Connor. “In fact, despite pandemic challenges, Duke Realty’s total in-service portfolio was 97.1 percent leased at September 30, 2020 compared to 96.7 percent leased at June 30, 2020 and 96.2 percent leased at September 30, 2019—driving the company’s highest total and in-service portfolio occupancy levels since early 2017.”

This project isn’t the only one under Duke’s belt. The developer has $1 billion in assets under construction in Southern California. The Perris property is being built to LEED Silver standards, and will feature 40-foot clear height, level floors, 241 dock doors, 344 trailer stalls, 442 automobile parking spaces and four grade-level loading doors. These features target ecommerce users. “The pandemic has led to increased ecommerce activity resulting in higher demand for convenient ecommerce distribution space in tier one markets like Southern California,” says Connor. “JLL’s recent U.S. Industrial Outlook for Q3 2020 indicates that total net absorption will hit a 200 million square foot benchmark this year—Inland Empire is helping drive it with one of the highest net absorption rates in the country.”