Duke Realty Corp. New Project

Duke Realty Corp. plans to build a new industrial development near the Port of Houston that can accommodate 2.9 million square feet of warehouse space.
The project, named FairPort, will cost between $130 million and $140 million to build out over the next seven to eight years, according to David Hudson, Duke's senior vice president in Houston.
It is the Indianapolis-based firm's first real estate deal near Houston's port, a submarket that's been heating up since last year's opening of the Bayport Container Terminal (See related story below).
FairPort will be located on 161 acres recently acquired by Duke near the southeast corner of West Fairmont Parkway and Underwood Road. The southern part of the site sits in Pasadena, while the northern portion is in La Porte.
The undeveloped land was part of a multicity portfolio purchased in December from Powers Holdings LLC of Savannah, Ga.
The purchase price was not released, but a spokesman with Duke says the amount likely will be listed in the firm's Jan. 31 filing with the U.S. Securities and Exchange Commission.
As part of the deal, Duke also acquired a 12-acre container/chassis storage yard near the FairPort site and a 172,000-square-foot industrial building in the Cedar Crossing Business Park in Baytown.
Duke plans to break ground by early 2009 on a 400,000-square-foot to 500,000-square-foot building, Hudson says. The real estate firm is so confident in the port market it says it will build the structure whether or not it has any paying tenants lined up.
Once Phase I is 50 percent to 75 percent leased, Hudson says, work will begin on Phase II.
Duke also will market parcels for sale to companies that want build-to-suit facilities on the site.
Renewed interest
Ongoing development at the Port of Houston has given builders of industrial space a fresh interest in the area.
The $1.2 billion Bayport Container Terminal will substantially increase the number of containers that can move through the Houston area. The Port of Houston is already ranked first in the United States in foreign waterborne tonnage and second in total tonnage.
The increased capacity is fueling development of industrial facilities to handle the incoming cargo.
"The new terminal opening out there created lot of activity," says Steve Jaggard, president and CEO for the Vantage Cos. in Houston.
Vantage will finish construction in April on Bayport North Distribution Center Phase II, which is adjacent to Duke's FairPort acreage. Construction began on the 600,000-square-foot and 75,000-square-foot buildings on a speculative basis, after the 565,000-square-foot, Phase I building reached 87 percent leased and was sold.
"The absorption is pretty good," says Jaggard, noting that most facilities in the area were built in the last couple of years. "It's still a young market."
John Ferruzzo, an industrial principal with NAI Houston, says 5 million to 8 million square feet of properties are planned near the Port, some of which have already begun construction. The Port developments hope to attract users that need more than 100,000 square feet of space, he says, even though Houston's industrial market has traditionally targeted tenants needing 20,000 square feet to 30,000 square feet.
Ferruzzo questions whether there will be enough larger users to go around.
The uptick in Port activity has caused land prices to more than double in the last few years, Jaggard says, with prices now in the $3 per square foot range. Rents are following suit, he says, running 34 cents to 38 cents per square foot.
Duke, which focuses on port markets around the country, is pleased to finally have some acreage near the Port.
"It's a very good submarket to be in," Hudson says.

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