Duke Realty CEO Says Industrial REIT’s Vacancy Level Below 10-Year Historical Average

Jim Connor, chairman and CEO of Duke Realty (NYSE: DRE), participated in a video interview in conjunction with Nareit’s REITweek: 2021 Investor Conference.

Connor discussed the record absorption of supply seen in the fourth quarter of 2020 and the first quarter of 2021. This has resulted in the vacancy rate falling back to about 4.4%, which is below the 10-year historical average.

The supply/demand balance is “very favorable for us right now. I think you’ll see supply catch back up in the latter part of the year, but not at any sort of an alarming rate,” Connor said. Quarter to quarter vacancies will be at a level of 4.5% to the low 5% range, “which is still a very favorable place for us to be. We see that probably for the next couple of years,” he added.

Turning to construction costs, Connor pointed out that steel prices have risen about 150% since January, while the lead times for steel orders have increased. “It will continue to be a challenge for the foreseeable future,” he said. Lumber prices are also up dramatically, while land prices are higher, he noted.

Connor also commented that supply chain disruptions have resulted in companies increasing their critical inventory levels, which is a factor driving demand.

Turning to diversity, equity, and inclusion (DEI) matters, Connor noted that Duke has done well at improving diversity at entry and mid-level positions, but still needs to make progress at the senior level.

Duke has committed to having 50% of its board positions filled by women and people of color, Connor said. “We’re happy with that commitment and we think it really represents what companies and peers of ours should all be trying to do.”