"We're OK with that because the decisions we made in the first half of the year were the right decisions for the company," says chairman and CEO Thomas L. Hefner.

Those decisions include sitting on $103 million of cash, and keeping its $650 million in credit lines clear as it remains selective in purchase opportunities. Meanwhile, the REIT's $224 million in second-quarter property sales were at an average capitalization rate of 9.7%.

"We're willing to give up growth for protection," Hefner says.

The largest office and industrial REIT in the US, which focuses on Midwest and Sunbelt markets, freely uses the word "recession" to describe the overall business climate. Duke Realty's 16.2% vacancy rate in its 1.6-million-sf suburban Chicago office portfolio certainly appears recessionary. So does a 14.3% vacancy rate in Duke Realty's nearly 1.9-million-sf suburban Atlanta office portfolio. Atlanta is the REIT's largest market in terms of annual net rent, with 14.4% of the entire portfolio's total. The REIT's worst suburban office markets are Nashville (20.6% vacancy) and Raleigh, NC (18.5%).

"Overall, our markets are soft, especially on the office side," says president Richard W. Horn, reporting slower lease-up times for its vacancies.

Horn notes the vacancies are largely the result of two large terminations of 150,000 sf and 60,000 sf. Of the latter, 30,000 sf has been back-filled, he adds. "Our Chicago team is focused on these two blocks of space," Horn says.

Overall, Duke Realty renewed 64% of its leases up for renewal in the second quarter, with net rents on that space increasing 15.4%.