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Duke Realty's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: DRE

On industrial, the trends in e-commerce and supply chain modernization are also continuing to drive steady demand for our newer, larger box modern industrial portfolio. The on-campus medical office facility business also remains robust, particularly on the new developments on. The suburban office sector continues to be sluggish in most markets with a few pockets showing good absorption and moderate rent growth.

Looking to the rest of the year, we expect continued slow, but upward growth, yet we remain mindful of rising uncertainty and event risk from government fiscal issues across the globe in the upcoming U.S. election.

As I said, we had another solid quarter of leasing activity with 4.9 million square feet of signings. We reduced 66% of our leases during the quarter. On the renewal leases, we attained over 2.7% and 5.3% increased rental rate growth in our industrial and medical office businesses, indicative of our ability to push rents in a high occupancy portfolio. Office continued to be a challenge with slightly negative growth as we expected.

With respect to same property performance, we achieved positive same property NOI growth for the 12 months and three months ended June 30 of 3.7% and 3.4% respectively.

Now let me touch on some of the key activity within each of our product types for the quarter. The national industrial market continues to improve with demand drivers positive on most fronts. Early indication show second quarter vacancy levels for higher quality product declined another 25 to 40 basis points to just under 9.5%.

With respect to select Duke markets, Chicago, Atlanta and Dallas, all reported 50 to 80 basis point reduction in overall vacancy levels, with new supply levels on a national basis still relatively muted at roughly a quarter of a percent of inventory. We continue to have strong fundamental outlook in the industrial sector.

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