Duke Realty Q4 2021 Earnings Call Transcript

Participants

Corporate Executives

• Ronald M. Hubbard, Vice President of Investor Relations
• James Connor, Chairman and Chief Executive Officer
• Steve Schnur, Executive Vice President & Chief Operating Officer
• Nick Anthony, Executive Vice President & Chief Investment Officer
• Mark Denien, Executive Vice President & Chief Financial Officer

Analysts

• Nicholas Yulico, Scotiabank
• Jamie Feldman, Bank of America Co.
• Ki Bin Kim, Truist Financial Co.
• Dave Rodgers, Robert W. Baird
• Caitlin Burrows, The Goldman Sachs Group, Inc.
• Ronald Kamdem, Morgan Stanley
• Emmanuel Korchman, Smith Barney Citigroup
• Unidentified Participant
• Vince Tibone, Green Street
• Rich Anderson, SMBC
• Mike Mueller, JP Morgan Cazenove
• Bill Crow, Raymond James & Associates
• Anthony Powell, Barclays PLC
• Vikram Malhotra, Morgan Stanley
• John Kim, BMO Capital Markets

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by and welcome to the Duke Realty Earnings Conference Call. [Operator Instructions]

I'd like to turn the conference over to our host, Ron Hubbard. Please go ahead.

[Ronald M. Hubbard, Vice President of Investor Relations at Duke Realty]

Thank you. Good afternoon everyone and welcome to our Fourth Quarter and Year End Earnings Call. Joining me today are Jim Connor, Chairman and CEO; Mark Denien, Chief Financial Officer; Nick Anthony, Chief Investment Officer; and Steve Schnur, Chief Operating Officer.

Before we make our prepared remarks, let me remind you that certain statements made during this conference call may be forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. These risks and other factors could adversely affect our business and future results. For more information about those risk factors we would refer you to our 10-K or 10-Q that we have on file with the SEC and the company's other SEC filings. All forward-looking statements speak only as of today, January 27, 2022, and we assume no obligation to update or revise any forward-looking statements.

A reconciliation to GAAP of the non-GAAP financial measures that we provide on this call is included in our earnings release. Our earnings release and supplemental package were distributed last night after the market closed. If you did not receive a copy, these documents are available in the Investor Relations section of our website at dukerealty.com. You can also find our earnings release supplemental package SEC reports and an audio webcast of this call in the Investor Relations section of our website.

Now for our prepared statement, I'll turn it over to Jim Connor.

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Well, thanks, Ron. And good afternoon, everyone. Let me start by saying that 2021 was another outstanding year for Duke Realty. We met or exceeded all of our 2021 goals, including our revised guidance throughout the year. We also capped off the year with an excellent fourth quarter from an operational and financial perspective that sets us up for a great 2022 and beyond. So let me recap a couple of highlights from our outstanding year.

We signed over 33 million square foot of leases, which is an all-time record for us. We concluded the year with our in-service portfolio at 98.1% leased, a company record and particularly impressive as it includes the delivery of 7.7 million square feet of development projects in 2021. We renewed 75% of our leases or 90% when you include immediate backfills, we obtained 35% GAAP rent growth and 19% cash rent growth on second generation leases for the fourth year respectively both all-time records for us.

Same property NOI on a cash basis at 5.3%, we placed $1 billion of developments in service that were originally 39% leased at start dates, but are now 90% leased with a value creation of 69%. We commenced $1.4 billion in new developments across 33 projects, which was another all-time record. 61% of those projects were in coastal Tier 1 markets. We completed $1.1 billion of property dispositions and $542 million of acquisitions. We raised $950 million in green bonds with 10-year terms and an average coupon of 2% and we increased our annual common dividend by 8.9%.

And finally, we continue to run our company in the most responsible manner without ESG culture and our numerous corporate responsibility achievements, including our significant carbon neutrality goals, which were announced in November.

So now, let me turn it over to Steve, to cover operations for the quarter and touch on some market fundamentals.

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

Thanks, Jim. I'll first touch on overall market fundamentals. Fourth quarter demand was exceptional in the logistics sector with 122 million square feet of absorption, about similar to last quarter and the third highest quarter on record. Demand exceeded supply by about 40 million square feet which dropped national vacancy rates to an all-time record low of 3.2%, which is over 300 basis points below long-term historical averages.

For the full year, demand was 433 million square feet compared to completions of 268 million feet. Lease activity was robust and nearly all user groups, with the e-commerce, third-party logistics and retail representing the largest segments in the market as a whole as well as in our own portfolio. National asking rental rates rose again in the fourth quarter, up 11% over this time last year. We see this trend continuing into 2022 with nationwide market rent growth on average, expected to be around 10%. The reaction to supply chain bottlenecks continues to be in the early stages of a longer-term boon for our sector.

CBRE recently reaffirmed the just in case inventory restocking strategy will be a significant contributor to the 1.4 billion square feet of projected aggregate demand over the next 5 years. In addition, consumer spending growth and the continued secular growth in online shopping are driving much of this demand. For the current year, we expect the demand and supply would be mostly in balance, even as large as the under construction pipeline currently is. I'll remind everyone on this call, we estimate about 65% of the current supply pipeline is not located in our sub-markets.

Turning to our own portfolio results we executed a very strong quarter by signing 8.9 million square feet of leases with an average transaction size of 122,000 feet. Rent growth for the fourth quarter leasing was again very strong at 21% cash and 41% GAAP. We expect growth in rents on second generation leasing for the foreseeable future to be very strong. In our portfolio we estimate our lease mark to market to be 39%.

Turning to development. We had a tremendous quarter starts as Jim mentioned, breaking ground on nine projects only $466 million in cost. 80% of the fourth quarter development starts were in coastal Tier 1 markets and six of the nine projects were redevelopments of existing site structures. Our development pipeline at year ends totaled $1.4 billion. This pipeline is 48% pre-leased with active prospects to bring this number even higher in the near term. We expect to generate value creation margins in the 65% to 70% range of these projects.

Looking forward, our prospect list for new development starts, is very strong, and our land balance at year-end totaled $475 million with an additional $173 million of covered land plays. Our current land holdings are above our levels in the last few years and consistent with what we've recently communicated as much of the land acquired late in 2021 has been under contract for several quarters. 94% of our land balance is located in coastal Tier 1 markets. We own or control land that can support roughly $1 billion of annual starts for the next 4 years, as long as the demand picture remains robust, which we believe it will.

It's also important to note the market value of our land we own is about two times our book basis and on average, we've only owned this land for about 2 years. Our favorable land value will continue to support high development margins and very good long-term IRRs. We believe we are very well positioned to continue to lead the logistics sector and grow through new development.

With that, I'll turn it over to Nick Anthony to cover, acquisition and disposition activity for the quarter.

[Nick Anthony, Executive Vice President & Chief Investment Officer at Duke Realty]

Thanks, Steve. During the quarter we closed on $206 million of $1 billion acquisitions, most notably a 470,000 square feet property in Northern New Jersey in an off-market transaction as well as three facilities in Southern California, totaling 134,000 square feet. As noted on the last call, early in the fourth quarter, we sold our recently completed project in Columbus, Ohio, which was 100% leased to Amazon, generating proceeds of $80 million. I would point out that this transaction was placed under contract in April of 2021 as part of forward take out.

For the full year, our capital recycling encompassed $1.1 billion of asset sales and $542 million of acquisitions. Combined with the development previously mentioned by Steve, this activity moves our coastal Tier 1 exposure to 43% of NOI and overall Tier 1 exposure to 68% of NOI. Also earlier this month, we closed on the third tranche of assets to our joint venture with CBRE Global Partners for which our share of the proceeds was $269 million. The other dispositions expected this year are primarily individual assets across multiple markets and are projected to close, primarily in the second and third quarters of 2022.

I'll now turn it over to Mark, to cover earnings results and balance sheet activities.

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Thanks, Nick, Core FFO for the quarter was $0.44 per share compared to Core FFO of $0.46 per share in the third quarter and $0.41 per share reported for the fourth quarter of 2020. Core FFO decreased slightly from the third quarter of 2021 as we executed a significant volume of asset dispositions during the third quarter and did not fully redeploy the proceeds until late in the fourth quarter. Core FFO was $1.73 per share for the full-year 2021 compared to $1.52 per share for 2020, which represented a 13.8% increase.

FFO as defined by NAREIT was $1.65 per share for the full-year 2021 compared to $1.40 per share for 2020. AFFO totaled $589 million for the full-year 2021 compared to $517 million in 2020 and $148 million for the fourth quarter of 2021. Our annual results represented a 11.6% increase to AFFO on a share adjusted basis compared to 2020. Same property NOI growth on a cash basis for the 3 months and 12 months ended December 31, 2021 was 5.2% and 5.3% respectively.

I would like to point out that we continue to generate substantial NOI and FFO growth outside of our same-property pool as net operating income from non-same-store properties was 17.6% of total net operating income for the quarter. Same property NOI growth on a net effective basis was 3.9% for the fourth quarter and 4.5% for the full-year 2021.

As Nick mentioned, we closed on the third tranche of our contribution to our JV with CBRE Global earlier this month, we will use the proceeds of this contribution along with mortgage financing proceeds received from the JV, both of which totaled just over $300 million to fund the redemption next month of our $300 million, 3.75% unsecured notes, which were originally scheduled to mature in December of 2024. After this transaction closes, we will have no significant debt maturities until 2026 and ample liquidity to fund our growth.

Looking into 2022, yesterday, we announced the range for 2022 Core FFO per share of $1.87 to $1.93 per share with a midpoint of $1.90 representing a 9.8% increase over 2021 results. We also announced growth in AFFO on a share adjusted basis to range between 8.4% and 12.3% with the midpoint of 10.4%. Same property NOI growth on a cash basis is projected in the range of 5.4% to 6.2%.

In addition to realizing a full year of the impact of rental rate growth on leases we executed in 2021, we continue to expect strong rental rate increases in 2022. While on the surface it seems we have abnormally low lease expirations, we typically re-lease significantly more than is contractually set to roll with some pull forwards of future expirations. For instance, a year ago our expiration schedule said we had 7% expiring in 2021, but we actually rolled over 12%, and in fact, in this environment or customers and their brokers have been actively approaching us for early renewals.

We expect proceeds from building dispositions in the range of $600 million to $800 million and we have targeted assets with long lease terms and low annual rental escalations in our disposition strategy for the year. Development starts are projected in a range of $1.2 billion to $1.4 billion with a continuing target to maintain the pipeline at a healthy level of pre-leasing. Our '22 development plans include a significant component of speculative projects in coastal Tier 1 markets which we have consistently demonstrated a track record of quickly leasing and which we believe will allow us to take advantage of the continued rental rate increases in those markets. More specific assumptions and components of our 2020 guidance are available in the 2022 range of estimates document on the Investor Relations website.

Now, I'll turn it back over to Jim, for a few final comments.

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Thank you, Mark. In closing, I'd like to reiterate what a great year 2021 was for Duke Realty. As I noted at the outset, we exceeded all of our beginning of year expectations. As we look ahead into 2022, all of the demand drivers remain exceptionally strong. Demand is expected to roughly equal supply this year which bodes well with our continued record low vacancy, strong pricing power to drive same-property NOI growth. We'll continue to see the added value created by our dominant development platform.

As Mark noted, the midpoint of our FFO and AFFO guidance is roughly 10% over 2021, which is a level of growth that we believe we should be able to achieve on a consistent basis for the foreseeable future with our platform and the current market fundamentals.

Finally, I'd be remiss if I didn't thank all of my colleagues at Duke Realty for all their hard work and dedication that allowed us to achieve the level of success we have. I also want to thank all of our investors for their continued support and the recognition of our good stewardship of their invested capital.

Now, we'll open it up for questions. [Operator Instructions] Operator, we'll now take questions.

Questions and Answers

[Operator]

Thank you. [Operator Instruction] Our first question will come from the line of Nick Yulico. Please go ahead.

[Nicholas Yulico, Analyst at Scotiabank]

Thanks. Hi, everyone. In terms of the development starts, maybe you could just give us a feel for what's driving the range of starts this year, which is actually a bit lower than last year? What is the thought process there? And what would be a situation where you would get even more comfortable increasing your development starts?

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Thanks, Nick. I'll start off and then Steve can give you some color. I would say two things. We've always had a solid build-to-suit pipeline. And I think if we can continue to do a number of those large build-to-suits like we have, I would see us work towards the high end of our guidance. And the other thing ties back to our leasing. If we can continue to lease at the levels we have in 2001, I think we can accelerate speculative development as well, I think that would push us up to the high end or potentially give us reason to raise guidance. I don't know, Steve, if you have any additional color you want to add?

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

Yeah, Nick, I would just say, you look back at last year, our budget going into the year was in the $850 million range we did $1.4 billion. We had a very strong year in 2021, I think heading into 2022 we feel very good about our prospects. But part of it is getting out of the right sites entitled to get them started. So, the demand picture is strong. It's more about being able to find the opportunities to get them started.

[Nicholas Yulico, Analyst at Scotiabank]

Okay, thanks. So, just to follow up on the development pipeline and the margin that you're citing. How should -- which went up versus last quarter cap rates down but yields compressing a bit on development new starts. How should we just think about that dynamic going forward about where cap rates could move? Where development yields are penciling out over the next year?

[Nick Anthony, Executive Vice President & Chief Investment Officer at Duke Realty]

Hey, Nick, this is Nick from Duke Realty. I think we continue to see very strong rent growth in the markets that we're focused on, and I think as long as we can continue to see that rent growth that will continue to help us achieve the above normal margins that we've been achieving historically.

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Yeah, and I would just point out, Nick, that a little bit of the decrease in the stabilized yield in the pipeline from last quarter to this quarter. It's really a market mix situation, we placed some assets in the service that we're in lower barrier markets with higher yields and replace that with new developments in more coastal markets that the initial yield may be a little lower, but it's a market mix, the value that we're creating actually went up.

[Nick Anthony, Executive Vice President & Chief Investment Officer at Duke Realty]

Yeah. And I would tell you on cap rates, I mean, even though we still have not seen any increase in cap rates even with interest rates going up, there is still very strong investor demand out there and we expect that to continue for the foreseeable future.

[Nicholas Yulico, Analyst at Scotiabank]

Okay. Thanks, guys. Appreciate it.

[Operator]

Thank you. Our next question then will come from the line of Jamie Feldman. Please go ahead.

[Jamie Feldman, Analyst at Bank of America]

Great, thank you. I guess, I know you touched on it a little bit. But can you just talk about more about the kind of big picture supply story? I mean, you see some of the projections coming out of the brokerage firms in 400 million, 500 million square foot range for the U.S. this year. Just how should we be thinking about the risk of the cycle ending early or just the exposure in your markets, or just thinking about the largest pieces of that?

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Jamie, we see the same data that you do. And we've been hearing the same stories for the last several years and I think there is a pretty substantial disconnect to this projected supply number and actual annual completions. And I'm sure the devil is in the detail on how some people count in terms of announced projects as opposed to actually really started projects. But I think in today's world, the rising cost of building materials, the rising cost of land, the increased level of difficulty to get sites entitled and out of the ground is placing it, if you will an artificial damper on new supply. So, while everybody saying supply and demand will be equal. I wouldn't be surprised if we were here a year from now, and we've had another year like this, where demand exceeded supply simply for those reasons I cited earlier.

[Jamie Feldman, Analyst at Bank of America]

Okay. And then we keep hearing about for the supply we're seeing or that's being built, and some of it's in more tertiary submarkets. What's your thought on that being competitive or putting pressure on rents in your portfolio or for your development projects? Are you seeing a real difference in pricing across different submarkets in the same market?

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

No. Jamie. Okay, I'll start. I would tell you, we're not seeing big variations between submarkets in the markets we're in. But if you look at the under construction pipeline, I mentioned that 65% of it is not in either markets or sub-markets we operate in, Phoenix, is an area has got a lot of construction going on right now, we're not in that market, Greenville right? Memphis, San Antonio a lot of these markets that we don't own property in that, but have big supply numbers. In terms of the markets that we own property in, the 19 markets we're in, I would say Houston is probably the one that we've talked about on a number of these calls that continues to be a little soft and not one that we will be starting to building in any time soon.

[Jamie Feldman, Analyst at Bank of America]

But I guess even within the markets you are in where there is supply, you think rents are kind of constant across submarkets?

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

Yeah, I mean, it varies, right? You've got -- its jumping all over. But you've got -- no, I mean in markets we're in, we're seeing strong rental growth obviously we put up record numbers for ourselves this year, I think we went into this year and in 2021 thinking that market rent growth in the U.S. was going to be in that mid-single digits, to maybe pushing double digits and we were wrong again, it ended at 11%. And I think its set up to do the same thing in 2022.

[Jamie Feldman, Analyst at Bank of America]

Okay. All right. Thank you.

[Operator]

Our next question will come from the line of Ki Bin Kim. Please go ahead.

[Ki Bin Kim, Analyst at Truist Financial]

Thanks. Congrats to another great year. I just wanted to stick with the development topic. With the total value noshing down just a little bit, but if you think about the inflation that we've seen, it probably implies that the square footage or a number of projects that you're actually projecting to start on is lower than the dollar value. So, can you just talk about that part of it? And what yields you're expecting for your 2022 start?

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Go ahead, Steve.

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

Sure. Ki Bin, it does depend on where we end up in that range, right? But I think it's safe to say that we'll do somewhere between 8 million to 10 million square feet of new development starts. As Jim or Mark alluded to early on, part of it is that the demand picture looks really good for us. We've got a number of large projects we're working on, but it depends on some of that pre-leasing and how much risk we want to take on.

And in terms of returns, our stabilized returns, again, I think will be a little dependent on market mix. But assuming we're consistent with 60% to 75% in our high-barrier markets, I think the returns in the low 5s stabilize is probably a reasonable expectation. And I think our value creations, considering where cap rates are still going to be healthy as they are today.

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Yeah, the only thing I would point out Ki Bin is you're right on, I mean, I think if you do theoretically the same dollar value development this year that you did last year on a cost per square foot basis it's going up, right? So, you're probably developing less square feet because costs are going up. But part of it is also market mix once again, right? It's we're going to do smaller buildings per se per dollar per square foot in these coastal markets, which is where more of our development continues to take place.

[Ki Bin Kim, Analyst at Truist Financial]

Got you. And on a separate topic, where do you think we are in terms of the infrastructure build-out to support e-commerce growth? And I'm curious if you think 2021 was a kind of pull-forward demand year and if the next couple of years look a little bit more normalized.

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Well, let me answer both of those. We've been asked a number of times in a number of different ways about how the Infrastructure Bill and infrastructure spending is going to help. And I've told people that I think you have to exercise reasonable expectations. And the best example I can get is, remember, we talk about the expansion of the Panama Canal for years, and it took many years for it to get done and complete and fully operational before we started to see the effect. So I think the legislation is still less than, what, probably 90 or 120 days old. You got to get projects approved and funded and started before you're going to see that. So, I think it will be several years before we'll see the full impact of that. So, I think that was the first question. And what was the second part of your question, Ki Bin?

[Ki Bin Kim, Analyst at Truist Financial]

So, I was actually talking more about the warehouse network build-out for e-commerce, not the Infrastructure Bill. And where we are in terms of innings? And if you think 2021 was like a pull forward year, where maybe '22, '23 looks a little bit more normalized

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Well, I would tell you, I think we believe '20 was a pull forward year. And I think if you look at some of the big players in e-commerce and the traditional retailers that have moved very strong into e-commerce, their numbers for '21 were down over '20. And I think these are somewhat more normalized years that we're in. But I think everybody believes we're still in the early innings in terms of the development of fulfillment centers and e-commerce supply chain, last mile facilities for e-commerce retailer as well as our traditional customers like FedEx and UPS continue to grow dramatically. So, I think we're in the early innings. I think you'll continue to see some ups and downs with the different aspects of business. But I think we're going to continue to see that sector grow at a very healthy rate.

[Ki Bin Kim, Analyst at Truist Financial]

Okay. Thank you.

[Operator]

Our next question will come from line of Dave Rodgers. Please go ahead.

[Dave Rodgers, Analyst at Robert W. Baird]

Yes, good afternoon, everybody. Obviously, the financial guidance you gave is pretty bullish for the year ahead. And I think largely expected by the Street. It seems like, and maybe we've all touched on it a little bit, the investment guidance is much more conservative, lower acquisitions, lower dispositions, lower development starts than kind of where you were last year. But I guess, I wanted to understand that more and even Mark's comments about using asset sales to pay off debt as opposed to kind of growing and shrinking the balance sheet versus growing it. So, I guess I want to understand, is there something that you're worried about? Do you have the ability to take development starts to $1.7 billion, $2 billion with the combination of land, entitlements, labor, steel? Or are there some natural barriers right now that you're coming up against in terms of being able to invest more capital more aggressively given the low vacancy rate?

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Well, let me start off and then others can chime in. No, we're not -- we don't have any barriers. And I think if you look at where we started the year with guidance in 2021 of $850 million and where we ended up the year, I think those possibilities exist as I said earlier, about the development pipeline. It's a function of some of the bigger build-to-suits and how many of those we signed during the year that would push us towards the higher end of guidance or to exceed our initial guidance, much like we did last year. And then it's continued leasing volume and the ability for us to accelerate more speculative development in most of those markets. We've ramped up our landholdings to support a significantly larger development pipeline going forward. And I think we've indicated that we're going to continue to be actively buying land. So no, we're not -- there's no hidden message, we're not managing. I think this is probably pretty consistent. Good, strong but prudent guidance. And I hope to have the opportunity to tell you over the course of 2022 that we intend to raise guidance a few times.

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Yeah, Dave, and I would just add to your specific point on asset sales to pay the debt off that I did refer to, that's really a temporary thing, it's not like we went out and sold assets to pay back debt or to buy back debt early. That was really just to keep them having a bunch of cash sitting on our balance sheet here in the first quarter. The way we look at that it just frees up our balance sheet to do even more debt now to fund this growth that Jim just went through without deteriorating our balance sheet any. So. that was really more just a temporary use of cash.

[Nick Anthony, Executive Vice President & Chief Investment Officer at Duke Realty]

Yeah. And then lastly, Dave. I would add on the acquisition side. I think last year we had a midpoint guidance of about $400 million we did like $530 million or $540 million. Acquisitions are top you just -- it depends on what the opportunities are. And frankly, most of the -- majority of our growth is going to be through development because we like the risk adjusted returns there better than the acquisitions.

[Dave Rodgers, Analyst at Robert W. Baird]

Great. And then Nick, maybe just staying with you for a follow-up. On the cap rates for acquisitions and dispositions, realizing they're relatively small, but is about 120 basis point spread between acquisitions and dispositions last year, there was a lot of ins and outs, and it seems like this year might have some skew as well. But can you talk about that spread in 2022? And maybe kind of what that normalizes that looks like, ex-Amazon?

[Nick Anthony, Executive Vice President & Chief Investment Officer at Duke Realty]

Yes. I think those spreads will continue to be about the same. What I would point out though, is the total returns or the IRRs, the spreads have expanded in the last 18 months. And for 2021, we calculate the spread at about 250 bps that our acquisition IRRs were 250 bps higher than our disposition IRRs.

[Dave Rodgers, Analyst at Robert W. Baird]

Great, that's helpful. Thank you.

[Operator]

Our next question will come from the line of Caitlin Burrows. Please go ahead.

[Caitlin Burrows, Analyst at The Goldman Sachs Group]

Hi there. I guess -- good afternoon. I guess as you guys look at occupancy yet ended the year, almost 98% occupied and it seems like you generally expect that to stay flat or even increase at the mid or high-end of your guidance. So, just wondering if you can give some current thoughts on kind of ideal occupancy and recognize that not necessarily the key metrics, but how occupancy that high makes you comfortable that you are indeed getting the strongest rent growth in same-store NOI growth possible?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Well, I'll start Caitlin. I mean, I quite frankly I like 100% occupancy. Jim is always talking about 96% or 97% and having some room, but as long as we're getting the best rents we can get why wouldn't you want a lot of occupancy too. I think I just go back and I look at -- you look at our rent growth that we posted. And I think we'll be at or near the top of our peer group. So, as long as we're posting rent growth numbers that are at or near the top of the rent growth -- peer group, I'm sorry, having high occupancy levels is a good thing. From a same property perspective specifically and we don't really give guidance on same-property occupancy, but I could actually see that even tick up a little bit, not a lot, but maybe 20 to 30 basis points from '21 to '22 and be in that kind of low to mid 98% range and that's really what we're projecting. We don't have a lot of expirations like I pointed out in our prepared remarks, but we will likely roll more of our portfolio than what's expiring, but that doesn't do anything to occupancy right, it's just keeping tenants in there and it's getting to that rent stream even quicker.

[Caitlin Burrows, Analyst at The Goldman Sachs Group]

Got it. And maybe just a quick follow-up on kind of leasing trends. Last quarter you guys gave some impressive stats on how leased properties were when they went into service at 90% and that the average lease-up time since 2019 of your expect developments had been under 2 months from having been placed in service. So, just wondering, I know it's only been a quarter, so they don't move that drastically, that quickly, but I'm wondering if you have any reason to believe that lease up timing could begin to take longer or if that's it?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

No. I would say, as we sit here today, it's still -- we're pretty much right on the timing, I guess, that we've been at the last 12 months. Like if you look, for example, at the deliveries this quarter, they were 71% leased when they went in service, but they were actually 39% leased when we started those projects. So, we almost kind of almost doubled the occupancy, if you will, before they were even placed in service. So we still continue, especially in markets like Southern Cal and Northern New Jersey to lease most of these projects up before they even go in service. So in those markets, you're looking at 0 to 2 to 3 months of lease-up time on average. And then in the other markets, it's maybe 6 to 9 months. So we continually beat our underwriting, which is 12 months. And I would say, as we sit here today, looking at our pipeline that we just started and what's about to come in, what we plan on starting the next couple of quarters, I think it's going to look very similar. Yes. The other metric I think that we point to is we've got in the portfolio a little under 6.5 million square feet of vacant space, 75% of which is not in service yet. So I think that speaks to the strength of the leasing activity that teams are seeing all across the country and the opportunity for continued outperformance in that area.

[Caitlin Burrows, Analyst at The Goldman Sachs Group]

Got it. Thank you.

[Operator]

Our next question will come from the line of Ronald Kamdem. Please go ahead.

[Ronald Kamdem, Analyst at Morgan Stanley]

Hey, two quick ones for me. Congrats on a great year. Just sticking to sort of the previous question on the same-store NOI guidance. I think -- when I think about sort of the rent growth numbers that you're posting, obviously, the rent bumps are what they are, potentially some occupancy tailwinds. When you think about why not higher, is it mostly because there's fewer leases rolling, as you mentioned? Or is there anything else with free rent or anything else we should be aware of that maybe is keeping that number a little bit lower?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

No, it's really roll. I mean if you look at what I call deal quality, the rent growth we're getting, the overall rates we're getting on deals, I'll put our deals up against anybody. I think our deal quality is as good or better than anybody, any other appears out there. We do have less roll, I mean that's a fact. I mean, so you got to look at on a risk-adjusted return, we're very happy with the guidance we put out. But the other thing I would just tell you on roll, like I mentioned in my prepared remarks, for '21, we were supposed to have 7% of our leases roll, we actually rolled 12%. If you look at '22, that's in our supplemental, we're showing 5% roll when we're all said and done, it will probably be closer to 10% that will roll.

So if you take that, you really need to take those 2 years and average them together because you got to remember, a lot of the '22 same-property growth will come from the '21 leases we signed and only part of '22 will come from the '22 leases we signed. Some of that will affect '23. So, if you average '21 and '22 together, we're going to call it, roll 11% of our portfolio over that 2-year period at a 20% cash rent growth number that we've going to posting, that's a little over 2%. You add the rent bumps to that, that are embedded in our portfolio, that gets you up close to 5%. Our guidance is close to 6% because the difference would be occupancy, free rent and things like that. So hopefully, that kind of walks you through.

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Yes. The other thing I would add, Ron, is the upside for us is what leases, we can get our hands on quite candidly. And at this point, early in the year, don't think Steve's guys across the country have a real good idea. All the total amount of leases will be able to pull forward and which ones they are, because it's early in the year and we're just in discovery dialog with a lot of those. So, depending how many we can pull forward, well, I think really dictate how close to the upper end we can get.

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

And then the last point I would make, circling back to -- I think it was Dave Rodger's question and Nick on dispositions and maybe being a little higher. The assets that we have targeted for disposition, our assets, quite frankly, that we think we've really maximized the value on them. There's some of our assets that had longer-term leases in it, quite frankly, lower rent bumps. And we think we can get very attractive cap rates on those assets. So we can sell those where we think we've maximized the value, and it really just helps our same property pool looking for more into '23, those kind of items will be more of an impact on '23 but we continue to get those lower-growth assets out of our portfolio and replace them with higher growth assets.

[Ronald Kamdem, Analyst at Morgan Stanley]

Great. And then just if I could sneak in a quick one. Just on the wage expenses, maybe can you talk about sort of what you're seeing on the ground? What sort of the construction and so forth? What you're hearing from tenants? Anything, any number you could throw around, is it up 7%, 8% year-over-year? Would be would be really helpful. Thank you.

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

Was that question on wages for warehouse workers or construction costs?

[Ronald Kamdem, Analyst at Morgan Stanley]

For warehouse workers? Yeah. Thank you.

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

I think it varies by region. But you've probably seen a 10% to 20% increase in some wages depending on the areas. I mean, look, our customers -- I think Caitlin asked a question earlier about these conversations with tenants and this is a conversation that Jim has with the operating teams quite often, which is are we pushing hard enough. And our customers are under a lot of pressure from a bunch of different points of their business, right, between transportation cost are up significantly, wages are up. Rent continues to be a relatively small part of the overall logistics costs. So, they're facing quite a few inflationary challenges out there. But rent continues to be a small part of it.

[Ronald Kamdem, Analyst at Morgan Stanley]

Thank you.

[Operator]

The next question will come from line of Emmanuel Korchman. Please go ahead.

[Emmanuel Korchman, Analyst at Smith Barney Citigroup]

Hey, guys. This is one for, I don't know, a combination, I guess, Steve and Mark. You spoke about the 2021 pullback -- or not pullback, but the early renewals and then 2022. A couple of questions. When you sign leases early, so the 2022 leases that you signed that were not expiring, did those rent bumps take place immediately? Mark, you spoke about the benefits of the same-store NOI, but do the new rents become effective at the end of the lease or mid-lease because you're doing them early?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Yeah, it varies, Manny. Generally, they don't take effect until the the current lease spends. There are some exceptions to that, but generally they don't take place till the new lease ends or the current lease ends.

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

Yeah, I would agree. I would say that, the one exception that Manny is, some of these conversations that take place around the tenants needs right whether they need something done in the building, some improvements. A lot of times, we'll redo the lease at that point in time. But, as Mark said, I'd say the say 75% of them are -- have to do with natural expiration.

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Yeah. And the only other point I would make is, these are not just to be clear, we do a few, but these are not generally leases that were expected to roll in 2 or 3 years from now. These are generally 6 to 9 month early.

[Emmanuel Korchman, Analyst at Smith Barney Citigroup]

Right. But Mark, I guess, the point I'm making is, you talk about the big benefit to cash flow from doing them early. But we -- from a model perspective, from a cash flow perspective, the fact you've signed them early in your leasing steps, it doesn't really impact cash flows, right? So, your 2022 at this point is still going to -- your natural lease expiration in 2022 is going to be about the same because you've just done them 6 to 9 months early right from a cash flow perspective?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

You're exactly right. But that's why I said you really need to average a couple of years together because the impact -- what I was trying to say is the impact of a lot of the leases we signed in '21 hit us now in '22. So, that's why you need to really take a couple of years and average them together. You're exactly right.

[Emmanuel Korchman, Analyst at Smith Barney Citigroup]

And then, I think you mentioned 20% cash rental rate growth when we do that average. Is that implying -- can we use that to imply what your 22 rent growth is going to be? Or do you want to guide us to sort of what those numbers fall out? Well, I think what we would say is we expect -- as we sit here today, we expect '22's rent growth numbers to look very similar to '21, which is called in that mid- to high 30% on a GAAP basis and high teens to low 20% on of cash. So yes, it's right in that area. And I think Michael has a follow-up.

[Unidentified Participant, at Duke Realty]

Hey, Jim. It's Bilerman. Just a question, if you think about longer-term strategic planning, has anything changed in your mind, or at the Board level about either global expansion, maybe diving deeper into the Asset Management business taking advantage of all the significant capital out there? Obviously you did the CBRE venture but going deeper and then thinking about helping your tenants, you look at what Prologis is doing in their Essentials business. Does any of that start to rise up higher in your strategic thinking?

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Yeah, Manny, those are -- I'm sorry, Michael, those are all topics that are consistently debated in our strategic planning efforts and at the Board effort. And we've not -- we're not prepared to announce any of those, but they're all in the mix, and they're all certainly things that we're talking about today, they are all things that, given our size and scale are opportunities for us.

[Unidentified Participant, at Duke Realty]

So it sounds like -- I don't know if you're able to rank those three things, Global Asset Management and Essentials, which one of them would be closer to potentially going first? So, I think your comments in the past have been, you want to be a U.S.-focused company, what distinguishes you relative to the peer set. You don't want to become a massive asset management, asset manager, you want to sort of do small direct ventures when the time needs to not put pressure on you to sort of fill those buckets. And then the last one being Essential seems like the most logical one, but I don't want to put words in your mouth.

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

And I appreciate that. No, I think you're correct. The opportunity for goods and services for our customers is very attractive. And I think that presents an interesting opportunity. Back to your original, to international. I would say sitting here today, we think we still have ample opportunity to grow in the U.S. markets, and we don't need to push to international to continue to maintain the level of growth that we had last year and that we're projecting into the coming years. In terms of the Asset Management side, anytime we're doing a joint venture like the CBRE one or any of the other joint ventures we have, we still try and keep the leasing, the management and the asset management. So it is a source of fee revenue for us even when we do some of these ventures. I think it will be a while before we're willing to take a big, big step and get purely into the third-party Asset Management business.

[Unidentified Participant, at Duke Realty]

Okay. I'll see you in Florida.

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Looking forward to it.

[Operator]

Our next question will come from the line of Vince Tibone. Please go ahead.

[Vince Tibone, Analyst at Green Street]

Hi, good morning. How are you thinking about selling individual assets versus portfolio of deal? Are you seeing any differences in pricing for investor demand, for single assets versus larger portfolios?

[Nick Anthony, Executive Vice President & Chief Investment Officer at Duke Realty]

Vince, this is Nick. Everything is very expensive. From our perspective, on the -- specifically on the acquisition side, we almost exclusively -- most of the transactions that we're executing on are lightly marketed or off-market transactions. The reality is most of the portfolio deals are going to be fully marketed. We look at them off-market and lightly market as well, but it is very challenging in the acquisition side right now. And we -- fortunately, we've got a good team in place that's leveraging the local development teams to go find some of these interesting infill assets that we can buy at pretty good yields.

[Vince Tibone, Analyst at Green Street]

But what about on the sell side, I mean do you think there is a portfolio of premium today for a combination of assets in just so many institutions looking to get into the sector? Or is it still selling single assets kind of get to the same overall execution as a bigger portfolio on the disposition side?

[Nick Anthony, Executive Vice President & Chief Investment Officer at Duke Realty]

That's always a tricky question. But I would answer is, yes, there is a portfolio premium on the disposition side. You saw us do that on several transactions last year. The reality is because investor demand is so strong, when you can get a bigger portfolio pull together, a lot of times you can sort of leverage that transaction. Now your buyer pool is going to be smaller. So there's a balancing act there. But a lot of times, you can -- you really push pricing on some of these bigger deals.

[Vince Tibone, Analyst at Green Street]

That makes sense. That's helpful color. One more for me. The book value of your development land bank is around $650 million. What do you think the market value of that land is today?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

2 times. Yeah, I think that we quoted that in our prepared remarks, too, Vince, we may not have been clear up on that. But yes, we think it's 2 times what the book basis is. You got to [Indecipherable] lot of this land. We've just recently put on our balance sheet, but it's been under contract in some cases for 9 to 12 months, and the market values have moved quite a bit in 9 to 12 months.

[Vince Tibone, Analyst at Green Street]

Got it. Thank you.

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Yep.

[Operator]

Our next question will come from line of Rich Anderson. Please go ahead.

[Rich Anderson, Analyst at SMBC]

Hey, thanks, good afternoon. So I was looking at the same-store projection for 2022 at midpoint, 5.8% same-store NOI. That's a different approach than what you've done in past years. In 2020, you started at 4% and then ended the year at 5%. In 2021, you started at 4%, ended the year at 5.3%. I'm curious if given the fact that occupancy is so elevated, do you really see that there's upside to the 5.8% in a similar manner that you've been able to produce in previous years? Or do you think that's a kind of a full number at this point, given all those inputs and outputs?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Well, I would answer it this way, Rich. We're comfortable with the guidance we gave, which does have some room above the 5.8%, the 5.8% to the midpoint of the guidance goes all the way up to, lets look at the number here, 6.2%. So I would tell you that, yes, there's definitely some fuel in the tank, so to speak to get to that 6.2%. I'm not prepared to sit here certainly and tell you we're going to get there, but there is a path.

[Rich Anderson, Analyst at SMBC]

Like a 105% occupancy? Sorry.

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

I'm sorry, Rich.

[Rich Anderson, Analyst at SMBC]

Never mind. I said like a 105% occupancy, but that was obviously.

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

We're trying, we're telling you, we are trying.

[Rich Anderson, Analyst at SMBC]

So second question for me is you mentioned supply-demand being in balance. We've heard that a lot in the past few years. Again, in 2022 and that equates to 10% market rent growth, which is a nice position to be in. But since demand can shock and turn off much faster than supply, at what point does that sort of that balance get you nervous in the sense that, okay, if supply is running x percent above demand on the national view, do you, as a company, start to take a more cautious approach to your own development process?

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Yeah, Rich, I think we would. But I think here's the fact of the matter. U.S. vacancy is 3.2%. If it goes up 100 basis points to 4.2%, that's where we were in 2019, and we had a pretty good year in 2019. Not quite as good as 2021. But I think any time you've got U.S. vacancies under 5%, it's a landlord market, and you'll continue to see us be able to put good value creation on the development side, both from build-to-suit and spec and continue to grow rents.

[Rich Anderson, Analyst at SMBC]

Right. And just a quick follow-up on the same topic. In Northern New Jersey, we're seeing a big spike in demand, perhaps no surprise if they support Manhattan as well of course, but is there anything unique going on Northern New Jersey that you're seeing that is particularly sort of eye popping right now or is it just sort of typical, good solid performance?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

I think, Steve, if you can talk about -- our demand is pretty much broad based. I mean, I can tell you there's one phenomenon in some industry that's driving it. Steve?

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

Yes, Rich, I would just tell you. I think the biggest thing happening around any of these large population centers is I think the whole e-commerce phenomenon is an online economy is translating to our business, right? So there was a question earlier about where we are and what inning. And I think Amazon might be in one inning and everybody else is sort of just getting on with warm up, right? So I think that's a big part of it. I think Northern New Jersey, in particular, with the demand side is -- the assets that are needed today, they're more modern assets for e-commerce fulfillment and they don't have that in Northern New Jersey. And so you're seeing the lack of opportunities for greenfield development. You got a lot -- as we talked about in our remarks, six of our nine projects in the fourth quarter are redevelopment. So that's causing a lot of that demand as well as the lack of available ready-to-go opportunities.

[Rich Anderson, Analyst at SMBC]

Yes. I saw all that. I know all that. I just saw a particular spike in Northern New Jersey that caught my attention, but perhaps we could take it offline. Thanks very much, guys.

[Operator]

Our next speaker then will come from line of Mike Mueller. Please go ahead.

[Mike Mueller, Analyst at JP Morgan Cazenove]

Yeah, hi. Just a quick one. Curious how did the bumps that you achieved with your 2021 leasing compared to the overall portfolio average?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Our portfolio average is up now Mike to right at 2.8 and the bumps that we did in 2021 leasing were just over 3. So, they continue to, to go north.

[Mike Mueller, Analyst at JP Morgan Cazenove]

Got it. And then I think earlier in the comments, you talked about rent forecast, rent growth forecast, it's about 10%. How does the Tier 1 coastal markets compared to that overall 10% average?

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

I think you'll see the Southern California, Northern California, Northern New Jersey, probably 3 times that. you're -- the Inland Empire is at 0.5% vacancy right now. I mean those numbers are astounding. There was -- the proposals we're quoting, our activity and our new development pipeline is up significantly. And we're quoting proposals today with an end date of very near-term end date that we need to get a response on because of how quickly rents are changing in those markets.

[Mike Mueller, Analyst at JP Morgan Cazenove]

Got it. Okay, thank you.

[Operator]

Our next question then will come from the line of Bill Crow. Please go ahead.

[Bill Crow, Analyst at Raymond James & Associates]

Good afternoon. Thanks. Are you or should you be pushing up exit cap rates and underwriting given kind of the advancement of the cycle, the increased longer term supply deliveries, increased financing costs, et cetera? Do you perceive the private market is contemplated pushing up exit cap rates?

[Nick Anthony, Executive Vice President & Chief Investment Officer at Duke Realty]

This is Nick. No, I don't think so. Now I will tell you, when we do our IRR analysis, we do have a 5% annual bump in our projections annually, but that's been pretty consistent over the years. The reality is on our development projects, we priced the exit capital based on comps that are out there right now in the market. And yes, I know interest rates have moved up a little bit, and that had some correlation to cap rates. But the other side of it is just the overall investor demand for industrial space and that still remains quite high. And I think that's going to continue to keep a cap on cap rates going forward.

[Bill Crow, Analyst at Raymond James & Associates]

All right. And I want to throw one in from left field here which is, there is a little bit of attention focused on the industrial sector, when we had the tornado disaster in the Kentucky and Indiana area. I'm just wondering whether there's been any follow-up discussions with tenants? Or as you think about developing new buildings whether there is any changed to the structure itself that anybody is contemplating?

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

No. Look, Bill, I'll tell you yes and no. Look, building codes change virtually every month across the country. And we're building state-of-the-art buildings to the top coat. We deal with earthquake issues and engineering around that. We deal with hurricane issues in Texas and South Florida and the Eastern Seaboard. So that's just the constant evolution on our construction and development people deal with that every day.

[Bill Crow, Analyst at Raymond James & Associates]

Okay. All right, thanks. That's it from me.

[Operator]

Our next question comes from the line of Anthony Powell. Please go ahead.

[Anthony Powell, Analyst at Barclays]

Hi, good afternoon. Just a question on the long-term development start outlook. Some of your peers have given you to target as a percent of our enterprise value or given outright numbers. How should we think about I guess your development starts over the medium to long term given kind of the overall strong environment?

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Well, Anthony, I guess I would tell you that it's consistent with the FFO growth numbers that we've given. We think we've positioned the company to grow at this level for the foreseeable future. So I think you should expect us to continue to have development guidance in the range that we've given this year, the levels that we were at last year. Pre-pandemic, we were well above $1 billion once before. So I think we're pretty comfortable committing that we can continue to operate at this level.

[Anthony Powell, Analyst at Barclays]

Got it, thanks. And I have seen more macro economists call for or predict an inventory first half of this year as people restock which could impact against the inventory to sales ratios that you and others quote. Do you worry about that> And if I that were to be the case, what do you think it would do to medium term demand growth?

[James Connor, Chairman and Chief Executive Officer at Duke Realty]

Well, our customers would love to get their IS ratios back up. Remember those? That number typically operates between 1.4 and 1.5, and that doesn't take into account the safety stock or the increased inventories that a lot of our customers are trying to build up. So you can extrapolate from where the IS ratio is today and you're talking about $1 trillion of additional inventories. So it's going to take us, given the supply chain issues that we're all dealing with today. It's going to take us a while to get those levels back up. In spite of everything that everybody is trying, I think it's -- the supply chain issues are here for well into 2023. So it's going to take us a while.

[Anthony Powell, Analyst at Barclays]

All right, thank you.

[Operator]

Next question will come from the line of Vikram Malhotra. Please go ahead.

[Vikram Malhotra, Analyst at Morgan Stanley]

Thanks. Just two quick ones. Just with all the rent growth that you've outlined where is the portfolio mark to market today?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

39% on a net effective basis in 29% on a cash basis.

[Vikram Malhotra, Analyst at Morgan Stanley]

29% on cash basis. Okay, thanks. And then just where would I, I'm not asking you to give '23 guidance, but if I were to sort of hypothesize and say rent still growing mark to market widening, occupancy flat you arguably have maybe even more to the re-lease next year. Why wouldn't same-store NOI growth accelerate from current levels next year? Where would you say I'm wrong?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Vic, you broke up there. I didn't quite get that question, could you repeat that please.

[Vikram Malhotra, Analyst at Morgan Stanley]

So I was saying that if you look next year you have more to lease. I know you do a lot of forward leasing but just optically there is more to lease, rent growth is it's still there this year. So, arguably the spreads versus market like you just outlined on a cash basis are higher than what you're achieving today. So why would same-store NOI growth not accelerate next year versus this year? Where would I be wrong in that statement? I'm not looking for specific number.

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

We haven't given that guidance yet, Vik, but I don't see anything wrong with that statement. So it's your statement, but I don't see any problem. Anybody has ever asked us about 2023 guidance. Congratulations.

[Vikram Malhotra, Analyst at Morgan Stanley]

Well, I'm the first. So, no, I was just wondering, you just outlined the cash rent to book or to portfolio mark to market. So it's seems like there's room?

[Mark Denien, Executive Vice President & Chief Financial Officer at Duke Realty]

Yeah. No, we're not going to say you're wrong.

[Vikram Malhotra, Analyst at Morgan Stanley]

Okay. Thanks so much guys.

[Operator]

[operator instructions] We're going to go the line of John Kim. Please go ahead.

[John Kim, Analyst at BMO Capital Markets]

Thank you. I was just wondering with your development pipeline becoming increasingly spec, if we should think about the length of the stabilization period, it's extending at all. I'm looking at this quarter your completions were 71% leased. I know demand is strong. I'm just wondering does it take an extra few months to fully stabilize?

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

Well, I don't -- I guess I'll start and I'll tell you, I don't know that it's a fair assessment to say it will be increasingly more spec. I think it was -- the fourth quarter was a bit of an anomaly for us. I do think as these construction material delays impact our business overall that may be a true statement going forward. But today, I don't know that's necessarily true. And I don't think our stabilization will change much. And our leasing has been strong in our portfolio, and we've been leasing them on average 2 months after they were put in service. And given the pipeline today of prospects, I wouldn't see that changing for us.

[John Kim, Analyst at BMO Capital Markets]

Okay. And my second question is on Amazon and their strategy to own more of the real estate. Are you seeing a noticeable shift in your markets as far as buying or leasing activity? And do you think other retailers or logistic providers are going to follow suit and decide to go this route?

[Steve Schnur, Executive Vice President & Chief Operating Officer at Duke Realty]

I would tell you the Amazon continues to be an active user. Their level of activity has come down a bit from what it was in '20 and then down to '21. I think in '22, it will be down a little bit more. But that was a good thing. That was a question everyone had for our sector. What happens when Amazon slows down a bit, and we've answered that. I think on the ownership side, we've seen them more active on acquiring land. I heard a stat the other day, they acquired 1,300 acres of land this past year, which was similar to what they had acquired the year before. I think a lot of that is being done in markets and areas that we're not necessarily going to compete with them in. Some of these G+ 4s that are out in tertiary locations. But we -- look, we haven't had the Amazon buy any of the assets we've sold with them in it. They've had an opportunity to do that. So I don't -- I can't speak for them, but I don't -- we haven't seen it compete with us in any market. And then in terms of other customers, not anything we're hearing from anyone trying to follow in any sort of footstep of Amazon.

[John Kim, Analyst at BMO Capital Markets]

Okay, great. Thank you.

[Operator]

Thank you. And at this time we have no further questions in queue.

[Ronald M. Hubbard, Vice President of Investor Relations at Duke Realty]

Thanks, Sean. I'd like to thank everyone for joining the call today. We look forward to seeing many of you throughout the year at various industry conferences as well as hopefully getting you out to physically visit some of our regional markets. Thanks again.

[Operator]

[Operator Closing Remarks]