Prologis and Indianapolis-based Duke Realty Corporation have completed their $26 billion merger agreement. In this major deal, Prologis will acquire Duke Realty in an all-stock transaction.

Both companies announced today that their boards of directors have unanimously approved the transaction.

“We have admired the disciplined repositioning strategy the Duke Realty team has completed over the last decade,” said Prologis co-founder, chief executive officer and chairman Hamid Moghadam, in a written statement. “(Prologis) has built an exceptional portfolio in the U.S. located in geographies we believe will outperform in the future. That will be fueled by Prologis’ proven track record as a value creator in the logistics space. We have a diverse model that allows us to deliver even more value to customers.”

How big is this acquistion? Proglois now acquires 153 million square feet of operating proproperties in 19 major U.S. logisics locations and 11 million square feet of developments in progress, about $1.6 billion in total expected investment.

Prologis is also acquiring 1,228 acres of land owned and under option with a build-out of about 21 million square feet.

“This transaction is a testament to Duke Realty’s world-class portfolio of industrial properties, long-proven success and sustainable value creation we’ve delivered over the years,” said Duke Realty chairman and chief executive officer Jim Connor, in a written statement. “We are confident that this transaction – including the meaningful opportunity it provides for shareholders to participate in the growth and upside from the combined portfolio — is in the best long-term interest of Duke Realty shareholders.”

Following personal dialogue between the executive teams of both companies, Prologis first sent a letter to Duke Realty on Nov. 29, 2021, regarding a potential transaction. On May 3, 2022, Prologis modestly increased the proposed exchange ratio – representing a 34% premium to Duke Realty’s stock price at the time– in a final attempt to engage privately to reach agreement on a mutually beneficial transaction. Duke Realty rejected the Prologis proposal that same evening.

The negotiations are now over, and the acquisition will move forward.

Ordering food from a delivery app? The odds are it might come from a ghost kitchen. And if you don’t know what these are, you will soon. Industry
analysts say that these kitchens – which prepare foods either from online-only restaurants or from several traditional restaurants in an area – are becoming a big part of the U.S. restaurant business.

Ghost kitchens, at their most basic, are commercial kitchens that don’t come
with storefronts. They also don’t come with any physical dine-in or drive-through restaurant attached. Instead, they are spaces that restaurant owners might rent to prepare food off-site so that they can deliver it more quickly to their customers. A single ghost kitchen space, then, might prepare the food from several different restaurants in an area.

Then there are those restaurants that don’t have any actual dining or carry-out spaces at all. They instead rely on an Internet presence and several ghost kitchens across the country. These so-called ghost chains run no physical restaurants. Customers instead order food online where it is then prepared in a ghost kitchen near them. Click to read more at www.rednews.com.

The prolonged COVID-19 pandemic has continued to have a strong impact across the real estate industry, from construction and brokerage operations to the marketing of listings and property closings. That uncertainty presents special challenges in working with existing tenants of leased space.

Building management professionals and tenants themselves have stepped up to outfit properties to support the safety, comfort and overall well-being of their occupants, whether they are workers, customers or short-term visitors.

Today, a strategic focus on retaining tenants and attracting new ones is paramount. In a nationwide survey of 450 building managers and real estate consultants conducted in the summer of 2021 by Blue Skyre IBE and market research company HarrisX, a whopping 94% said their properties have either already or were in the process of upgrading HVAC filtration systems. Two-thirds of buildings have hand sanitation stations and frequent cleaning of high-touch areas, and 62% of those surveyed say temperature checks were required to enter the office.

A full 60% of property managers reported having a documented contingency plan for dealing with COVID-19 surges and 30% were preparing one.

Renegotiating lease terms

As tenants review their long-term space needs and seek changes to their real estate footprint, flexibility has become the norm. With in-office head counts expected to be reduced for the foreseeable future, it’s important to stay open to renegotiating lease terms early to satisfy tenants who might otherwise look to cut and run. The option to sublet their existing space, even for a limited period, has become appealing, especially for tenants unsure of their longer-term space needs.

Existing office tenants with traditional three- to five-year leases are having a much easier time shortening those commitments than they have in the past. In the retail sector, investors have reason for optimism. Net new-store openings exceeded closings in the fourth quarter of 2021, and leasing is showing signs of improvement.

Sale-leaseback option

Another option gaining traction is the sale-leaseback. A struggling business can improve its cash position by selling its owned real estate while retaining the right to use the property through a long-term lease. Investors seeking quality, income-producing property with a tenant willing to sign a long-term lease may find this an attractive opportunity. These commitments are usually 10 to 15 years.

What’s influencing office and retail recovery

The principal factors needed for office and retail recovery fall into three main areas:

Striking a balance between owner and tenant needs: Property owners are currently focused on tenant retention at all costs, but they also must satisfy investors.
Offering plentiful amenities and concessions: Owners and building managers will continue to be generous with concessions and keep rent hikes minimal in the next few years, until tenant demand notably increases. On-demand concierge and delivery services that sprang up in the pandemic are likely here to stay.
Remaining patient: Organic business growth may not be sufficient to generate absorption for current vacancies. In the absence of major industry shifts or a new industry entering a local market, population growth will be necessary to absorb the oversupply and bring down vacancy rates, especially in large urban centers.

Digital adoption accelerated by the pandemic has had enormous consequences for work life, consumer habits and the spaces people occupy. And attention to a building’s carbon footprint has become an essential component of any real estate footprint conversation.

Health and safety protocols pertaining to a structure, whether a new build or a retrofit, now double down on concerns like air filtration, insulation and other many other energy-efficiency priorities. Higher green building standards are not only good for the environment, they’ve become essential for business. The investor community’s expectations are changing along with the public when it comes to sustainable practices that will continue to matter long after the pandemic has subsided.

Looking for ways to adapt?

Wipfli can help you navigate real estate decisions during a time of dramatic market and economic volatility. Our advisors help guide your strategic planning and assess trends that matter most to your business. Making smart investment decisions requires thoughtful, proactive planning, not reactive changes in response to immediate events. We’re here to help you and your investors stay on track for the long run. Learn how we help.

Cory Bultinck is a partner in the Minneapolis office of Wipfli. You can reach him at cbultinck@wipfli.com.

The “Texas Miracle” that defined the economic prosperity of the Lone Star State has cut a wide swath across all asset types. Beyond the pandemic, no asset type has realized more seismic changes in recent years than retail. From disruption in technology to consumer preferences, the space devoted to purchasing goods and services continues to evolve. While Texans share a common bond, the retailers and real estate community in every region of the State have had a unique experience navigating the choppy waters left by the pandemic.

Austin

Austin’s retail market remains on firm footing. Vacancies fell to about 3.5%, well below the national average of 4.5%, and are among the top-10 lowest in the country. The market has seen some of the strongest demand over the past year, with about 2 million square feet absorbed despite disruptions from COVID-19 variants. Substantial population and economic growth have kept the market strong over the past few years.

Swift action by Congress to get money in the hands of individuals and PPP loans into the hands of businesses helped keep the market afloat during the early days of the pandemic. However, the market hasn’t been kept strong just due to government stimulus. Significant expansions in the tech sector, wage growth, and household formation have buoyed retail prospects. Consumers have resumed normal spending patterns, driving leasing activity to within a short distance of pre-pandemic norms. Click to read more at www.rednews.com.