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CEO Spotlight: Duke Realty Nearly Finished With Repositioning

12/06/2013 | By Mitch Irzinski

Denny Oklak, chairman and CEO of Duke Realty Corp. (NYSE: DRE), joined REIT.com for a CEO Spotlight video interview at REITWorld 2013: NAREIT’s Annual Convention for All Things REIT at the San Francisco Marriott Marquis.

Oklak gave an update on his company’s repositioning efforts.

“We’re basically there,” he said. “In our targets from about four years ago, when we started this repositioning, we’d be 60 percent industrial, 25 percent suburban office and 15 percent medical office, which was sort of a flip flop from where we were four years ago.  So we’re virtually complete, and I think it’s really worked very well for us for a couple of reasons. One is the suburban office business. While it’s certainly getting better, it’s still a fairly difficult area to be in today when you look at the employment situation in the country and just overall job growth. But the good news is as we’ve repositioned into industrial and medical office, both those businesses are doing very well.”

Oklak discussed his expectations for the medical office sector in 2014.

“We have very high expectations for the medical office business,” he said. “About 85 percent of our business on the medical office side is medical office buildings on the acute care hospital campuses – so, attached to the hospital in many cases.  We’re really seeing that business continue to grow. I think when you look at the drivers of the medical office business today, the Affordable Care Act clearly is going to drive that. We think that that’s going to drive more people into the health care system. It’s going to drive folks to look for lower cost alternatives. And we think a lot of the lower-cost alternatives will be operations that are conducted in our medical office business versus, say, the acute care hospital.”

Oklak shared his opinion regarding whether the industrial sector is becoming overbuilt.

“I think what we’ve seen over last few months is there is speculative development going on in virtually all the markets today,” he said.  “But we’re pleased that it really hasn’t gotten out of control like it can sometimes on the industrial side. “