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CRAIN’S CLEVELAND BUSINESS
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DECEMBER 17 - 23, 2012
Duke: Firm stems vacancy tide at Rockside properties continued from PAGE 1
North Olmsted a year ago. The office buildings on and near Rockside languished as the real estate boom of early last decade went bust and the 2008 Great Recession hit home. The last prospective deal for the buildings on Rockside fell through in 2007 and Duke called a timeout on the sales effort in 2008 when a different buyer lost its financing. However, in recent months, multiple prospective buyers have reviewed the properties, insiders say. Originally, Duke sought to redeploy capital to areas with stronger economies and higher rents. However, as the real estate credit crunch took hold and leverage became a
dirty word to stock analysts and investors, the real estate investment trust began selling properties to reduce leverage and consolidate into core markets. Today, Duke is pursuing a goal of reducing its suburban office holdings to 25% of its portfolio from the current 30% and concentrating on industrial and medical office buildings and build-to-suit opportunities. In a Nov. 1 conference call with investors, Duke executives suggested they would conclude a major property sale by the end of this year.
A bit of foreshadowing According to a Seeking Alpha transcript of the conference call, Dennis Oklak, Duke chairman and
CEO, said disposition activity had been relatively slow the first nine months of the year, but that “you will see overall disposition activity pick up by the end of the year.” Last December, Duke sold to Blackstone Real Estate Partners, an affiliate of the Blackstone Group private equity firm in New York, 79 suburban office buildings — or nearly 10 million square feet of office space — for $1 billion. Tom West, director of office services at the Cresco real estate brokerage in Independence, said high vacancy in the 20% range has continued in the Rockside Road office corridor, but the Duke properties gained traction this past year. For example, Duke in October filled
Lighting: LED demand growing globally continued from PAGE 3
“This acquisition was all about growth … and getting to big customers faster,” she said. Revenue from GE Lighting’s LED business already is growing about 50% to 70% annually, Ms. Sylvester said. Today it accounts for about 25% of GE Lighting’s sales, up from 15% a year ago, she said. That figure should jump to 35% next year, she added. The unit does not release its sales figures.
A switch at the switch Today, most of GE Lighting’s LED sales come from products used
to light streets, parking lots and retail stores. Although the company offers LED bulbs to replace the incandescent bulbs most people use in their homes, they have yet to be widely adopted because of what Ms. Sylvester described as “a price point challenge.” Even though the LED bulbs use less electricity and are expected to come down in price, they remain many times more expensive than incandescents. The popularity of commercial and industrial LED lighting products has slowed sales growth related to GE Lighting’s fluorescent and high-intensity discharge lighting
products, Ms. Sylvester said. Sales of those products soon should start to shrink as LEDs replace them, she noted. “The market’s moving very quickly,” she said. Between 60% and 70% of GE Lighting’s product development budget goes toward LED products, up from about 20% four years ago, said Steve Briggs, general manager of global product management for GE Lighting. The overall size of the budget has grown, too. The company has added about 200 people to its global engineering team since 2009, through internal growth and acqui-
most of an empty building on Rock Run in Seven Hills with a 50,000square-foot lease to Cambridge Group, a unit of Sedgwick Claims Management Services. No information on the pricing of the Rockside Road properties was available. However, Ryan Moore, an office investment sales specialist at the Independence office of the Marcus & Millichap Investments brokerage, said the portfolio is likely to be sold at a discounted price. Word of a looming sale comes as a bit of a surprise. In what appeared to be a sign it would remain in the market longer, Duke shifted the leasing and property management assignment for the portfolio to Jones Lang LaSalle’s Cleveland office
from CBRE Group. Tom Fox, a Jones Lang senior vice president who heads its Cleveland agency business, and David Browning, managing director of CBRE’s Cleveland office, both declined comment on Duke’s potential sale of the properties. Jim Clark, a Columbus-based Duke senior vice president who oversees Cleveland operations, declined comment. In an email, Mr. Clark said, “As a publicly held company, Duke Realty cannot discuss any development, leases, acquisitions, or dispositions that may or may not be pending.” Och-Ziff did not return two phone calls and an email by Crain’s deadline last Friday, Dec. 14. ■
sition, according to a company spokesman. Of the 700 people who work at Nela Park, about 100 are engineers. “We’ve practically doubled the size of our engineering team,” Mr. Briggs said.
ures, the 2012 sales total would more than double the $5.5 billion sold in 2010. In the industrial market, sales of LED lighting products grew by 17% worldwide in 2012 versus 2011, but the market climbed by 70% in North America, she said. Demand has been driven partly by incentives that utilities in some regions are giving to encourage companies to use less energy, Ms. Bhandarkar said. “It’s really taking off,” she said. Ms. Bhandarkar added that GE Lighting found a solid company in Albeo, which has 65 employees and also makes LED fixtures for nonindustrial businesses. “They have been really good at producing quality products,” she said. ■
World of growth Demand for LEDs is on the rise, especially among industrial customers, said Vrinda Bhandarkar, director of research related to LEDs at Strategies Unlimited, a marketing research and consulting firm in Mountain View, Calif. Worldwide sales of LED lighting products are expected to hit $12.3 billion for 2012, up 26% from $9.8 billion in 2011, according to Ms. Bhandarkar’s research. By her fig-
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