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Jojo Yap at the Donald E. Stephens Convention Center on Jan. 19, 2012
Employment growth in manufacturing may be a hot topic, but at Bisnow’s Chicago industrial summit last week, First Industrial Realty chief investment officer Jojo Yap (whose REIT owns 70M SF nationwide) says imports drive industrial RE more than manufacturing (gotta have a place to store those not-Made in America presidential campaign bumper stickers). Chicago may have only average economic growth and no port, but it’s still a winner based on infrastructure alone: Five Class-1 railroads meet here, ensuring its future as a huge intermodal hub. And Chicago garners amazing cap rates despite a lack of rental growth, Jojo says. LA average cap rates are only 150 bps lower, and its rents are expected to grow much faster than Chicago's. Still, cap rates will stay low here because "Chicago is liquid, large, and diversified."
Jim Dieter at the Donald E. Stephens Convention Center on Jan. 19, 2012
As moderator, Cushman & Wakefield industrial head Jim Dieter was to our national industrial panel what Larry King is to stymied politicians. Here, our normally smiley moderator gives his best answer-the-question glare. He attended an SIOR event “150 years ago,” and attendees were quantifying their markets' inventories (note: These numbers are fictionalized—also, no numbers were hurt in the writing of this story). 18M SF in Memphis, 22M in St. Louis. The 60M in Atlanta drew “oohs” and “ahs.” Then came Jim’s turn: “Chicago has 80M SF… vacant.”
Bob Smietana at the Donald E. Stephens Convention Center on Jan. 19, 2012
HSA Commercial Real Estate CEO Bob Smietana’s firm has 12M SF of industrial in 12 states. He likes Chicago because there’s always something going on. By contrast, HSA built a 200k SF building in St. Louis that sat vacant for years. A tour that left footprints in the dust every few months excited HSA, while competitors were leasing at Save-A-Lot-ish $1/SF rates. "Thankfully, it's finally leased," he reports.
Bob Clark and David Reahl at the Donald E. Stephens Convention Center on Jan. 19, 2012
Clayco CEO Bob Clark (with USAA’s David Reahl) says his firm wants to grow its Chicago biz, moving a good amount of operations to Downtown, including from its St. Louis HQ. But it's not skewing its building activity here, though. Of the 15M SF it delivered in the US last year, only 2M was in Chicago. All the panelists say manufacturing is coming back to the US. In fact, 75% of Clayco’s biz is build-to-suits for manufacturers, including four big ones going up now for an Illinois-based equipment manufacturer (all coming back from abroad). David, like fellow panelists, likes Central PA. (Jim says Liberty Property Trust just named C&W as agent on a 1.2M SF spec building in Bethlehem, Pa., perhaps the largest spec building rising in North America right now.) David adds that e-commerce could even benefit some secondary and tertiary markets.
Jim Clewlow at the Donald E. Stephens Convention Center on Jan. 19, 2012
CenterPoint Properties chief investment officer Jim Clewlow (demonstrating the one-armed hug technique), whose firm has 40M SF in the US, thinks Chicago manufacturing growth will occur in the Joliet area because the infrastructure built for imports works for exports, too. If you’re Ford, why wouldn’t you put a 4M SF plant next to one of the country’s largest intermodals, he asks. His take on LA: It’s a market secret that it has a huge manufacturing base, made of tons of 10k SF-ish tenants. As for other port markets, he’s leery of worshipping a false god and going overboard.