X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

LISLE, IL-Budget Rent-A-Car’s recent filing for Chapter 11 bankruptcy protection is a strong clue to Duke Realty Corp. that it will have to find new tenants for 182,000 sf of office space. Not only does it hit the Indianapolis-based office and industrial REIT’s bottom line, it could exacerbate an already soft East-West Corridor office submarket.

Daytona Beach, FL-based Budget Rent-A-Car pays nearly $4.1 million a year in rent, making the car rental company Duke Realty’s 13th-largest tenant. Lease expirations begin next year and continue through 2008, according to the REIT, including its 345,200-sf Central Park of Lisle at 4225 Naperville Rd.

“We do not have an indication of Budget’s intentions, but we expect they will leave,” says co-chief operating officer Dennis D. Oklak in Duke Realty’s second-quarter earnings conference call.

Budget’s bankruptcy filing comes shortly after a second quarter that saw occupancy in Duke Realty’s 1.6-million-sf suburban Chicago properties settle at 83.24%, better only than the Nashville, Raleigh and South Florida markets in the REIT’s office portfolio.

Direct vacancy in the East-West Corridor is 17.9% according to U.S. Equities Realty’s second-quarter report, but the vacancy rate soars to 25.9% when more than 2.2 million sf of sublease space in the DuPage County submarket is added to the equation.

Corporate accounting issues and a sluggish economy have hampered an office portfolio that had displayed signs of renewed strength three months ago.

“I never would’ve thought Budget Rent-A-Car would’ve filed for bankruptcy,” says chairman and chief executive officer Thomas L. Hefner. However, that bankruptcy filing along with soft markets have dragged office markets down in the second quarter, he notes.

Budget may not be Duke Realty’s only big problem. Decimated Denver-based Qwest Communications is the REIT’s third-largest tenant with rent payments of $6.89 million a year, nearly 1% of its total rent revenue. Space, primarily in Columbus, OH, begins rolling over next year through 2012, at least under the leases.

Duke Realty officials also are keeping an eye on Tekelek ($4.93 million a year in rent) and Nortel ($4.31 million a year), only because both companies who have the bulk of their space in the Raleigh market are in the stressed communications and equipment industry.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.