Leaders Shed Light on Industrial Sector’s Prospects
- Jun 14, 2018
By Paul Rosta
“Things feel pretty good.”
That’s how Blackstone Group’s David Levine summed up the industrial market last week at I.CON, the annual conference held in Jersey City N.J., by NAIOP. The comments from Levine, a New York City-based managing director for Blackstone, reflected the views of the members of the panel during the Thursday afternoon session moderated by principal & leader of the national industrial capital markets group at Avison Young.
Though not without its share of uncertainties and challenges, the industrial sector is marked by steady demand from occupants, a long runway for investors, and barriers to entry, especially in gateway markets. Levine cited vacancy that has dipped to unprecedented levels in many markets and added, “We’re still surprised at how limited supply is.”
Supply has largely remained in check, even as tenants are demanding more elbow room, reported Mashall Loeb, CEO of EastGroup Properties, a Ridgeland, Miss.-based REIT. “If you’re looking for a good site in Atlanta or Dallas, they are few and far between,” he said. He is noticing particular demand for an expanded footprint from current tenants.
A leading trend on the investment side is that foreign and domestic players alike tend to be under-allocated in the industrial sector, and particularly in U.S. assets, noted Amy Curry, regional director for GLP US, an affiliate of the Singapore-listed logistics giant.
Beyond the U.S., geopolitical tensions and economic concerns are tempering the development and investment outlook on some markets. Europe comprises a broad spectrum of conditions beyond the mature Western European economies. Italy, for instance, is experiencing declining GDP, and levels of political, economic and social uncertainty are sufficient to make some institutional players take a circumspect approach.
Brookfield Property Group remains confident about Europe’s long-term prospects, but “At least on the logistics side, we are going to hit the pause button,” said Jay Conforth, managing partner & global head of industrial at Brookfield Asset Management’s real estate group.
Regarding the much-discussed last-mile factor, panelists offered various perspectives. GLP’s Curry reported that “tenants are not scrambling” to adjust to changes in the supply chain, but they are focused on sorting out their approach.
Executives also shared insights into their own firms’ strategies. A self-described “port-focused” investor/developer, “Our acquisition and development and symbiotic,” explained Jim Clewlow, chief investment officer at CenterPoint Properties. “New development has been a bigger play for us.” When it comes to the supply chain, 60 to 70 percent of the firm’s tenants are focused on transportation costs, he estimated.
In the five years since acquiring IDI, Brookfield has refined its portfolio, paring its holdings down from some 25 geographic markets in 2013 to just nine today, Conforth explained.
At EastGroup Properties, Loeb reported, “We buy very few fully leased buildings.” Instead, the REIT prefers to seek out vacant properties and build the tenant roster from scratch.