Despite the weekend?s stormy weather, the outlook?s bright for industrial properties. That was the word at Bisnow?s first Industrial Real Estate Summit on Thursday at the Westin Galleria, where more than 400 of you joined us.
Trammell Crow Co managing director Scott Krikorian says DFW?s industrial market has hit bottom and is on the way back up. From a landlord?s perspective, he thinks another 12 months of that absorption may lead to some leverage. In the last 90 days, TCC hasleased 1M SF and in next 60 days, it'll be leasing even more. (Outside Texas, TCC is starting some spec building in New Jersey and has a lot of activity in the Inland Empire.) Scott?s optimistic about DFW: Jobs have been growing here in the last two quarters, matching absorption. And in the last six months, DFW added more than 50,000 jobs.
Hillwood Investment Properties VP Toby Rogers says when he looks at the most recent top dozen big deals, he's pretty encouraged. They break down into three categories: consolidation, expansion, and new business (aka relocations), and all three are pretty evenly split. ?We like to see that diversity. They're not just tire-kickers, but real deals and real absorption. In 2010, Hillwood had its best leasing year ever with the most new square footage we've ever had,? Toby says. Another interesting face—from just looking at Hillwood Investment Properties in '09 and '10—the average term of the deals in '09 was three years. In 2010, the deals were more than six years.
2008 and 2009 were difficult for CBRE and other brokerage companies, says Jack Fraker, vice chairman for CBRE (a valued event sponsor). Without enough revenue to carry overhead, Jack likened those years to the wildfires across Texas right now. It's part of nature to have fires every eight years or so to clean out the thatch and make the next batch of growth even stronger. ?Even though it's painful, it may be healthy for the industry because thestrongest people survive in downtimes; brokerage companies have to think smarter and examine how to operate more efficiently and make better use of resources,? he says.
Diesel fuel prices may drive how industrial facilities operate, saysMajestic Realty development director Al Sorrels. DC operators are trying to consolidate freight movement overseas and inland once it hits the port. There has been a trend to consolidate facilities leading to the 1M SF buildings that many developers (including Majestic) built. Now, the trend is to disperse those warehouses more regionally. Al says it's interesting the way freight movers are starting to consolidate with 18,000 TEUs (20-foot equivalent unit) freighters and trains that are three and a half miles long with four engines to get items from point A to point B.
IDI regional development officer Doug Johnson says he thinks there?ll be spec development in DFW by next year. The industrial market is about 11% to 11.5% vacant, and once it hits single digit figures, spec will follow. It's already occurring in various markets across the country. ?We have about six to eight leases out for signature now—we're turning the corner and heading up fast. Six months from now, we may look back and say April wasn't that bad,? he says. Refusing to fall in line with a former nickname, Doomsday Doug says he's feeling more optimistic. A year ago, there were 25 big-box buildings available and the market?s been absorbing aboutone a month. That would mean DFW should be out of big box space in another year, and that's good news, he says.
Duke Realty regional EVP Jeff Turner compares the industrial market to surfing (he's clearly spending way too much time in California). He says it looks like the wave is starting to come, and it may be riding a train and truck (rather than a surfboard) into DFW. He sees ?a 1 billion SF market in the works. We have no land constraint. We have plenty of rail and trucks, and people want to live here.? The Inland Empire and California already have it going on, though, he says. Just a few months ago, that market had tumbleweeds blowing through, but port activity is up 22%, and it's close to impossible to buy warehouse space there, he says. Jack says cap rates are below 6% (with some below 5%). That's a direct indicator that investors think the NOI, rent growth, and supply and demand imbalance are all there.
Holmes firm principal Ron Holmes triggered a discussion on the impact of widening of the Panama Canal. Jack says he anticipates an increase in giant containers going directly to Houston, Mobile, Tampa, and Jacksonville, largely because it's cheaper to move products via ship than rail or truck. Jack cites Walmart as an early indicator, with its decision to build a 4M SF warehouse/distribution center in the Port of Houston. Toby, too, thinks there will be increased cargo flows to Texas, but Hilllwood is betting on East Coast ports in Charleston and Jacksonville (where Hillwood recently opened an office and has plans to build). Scott, though, still thinks the West Coast wins that deal when the canal widens in 2014 or 2015.
Sponsoring a second Bisnow event in a row, Bradford Commercial Real Estate Service?s Kevin Santaularia, with RETC Group's Ami Singh, tells us the company sold 40 buildings for both users and distressed lenders in the second half of 2010 and transitioned 2.5M SF for its clients. As a multi-market service provider, the firm's grown from the 10M SF it managed and leased when Kevin bought the firm in 2000 to more than 20M SF last year.
Talk about a storybook marriage: Noah Weiss and Dallas native Casey Silverman met as students at Emory, moved to Dallas in '09, went to work in CRE lending at the great Bank of Texas, got married at the Dallas Ritz Carlton last May, and set off on a honeymoon. Well, who did they meet waiting for a ferry from Mykonos to Santorini but your publisher, who was vacationing with his wife and kids. Noah became a Bisnow reader and (no doubt as a direct result) has since been promoted from senior credit analyst tobanking officer, helping close several industrial, multifamily, office, and retail transactions, and is working on several more. We were delighted to catch up, even if it was at the Galleria rather than Greek Isles.
From our fabulous event sponsor Cantrell-McCulloch: Bobby McCulloch, Doyle Knowles, Larry Kosowsky, Mark Cantrell, andThomas Hooke. Mark tells us he's into the busy season becauseMay 31 is the protest deadline for appraisal values. Those protests will go into June and July for real estate and personal property. The firm reps $8B across 3,800 properties. Typically, the firm can get areduction on values for their clients, he tells us, and properties remain over-valued.
Providential Realty Partners' Cynthia Pendergast, Alliance Tax Advisors? Curtis Yates (an illustrious event sponsor), and the City of Greenville (also a wonderful sponsor) VP of development Judy Hudson, who tells us that the city (just 35 miles northeast of the Metroplex on I-30) is primed for development. She says Greenville is ideal for both business and industry with good highway and rail access and plenty of low-cost, shovel-ready sites. Last year, one of the city's high-tech industries, Cytec Engineering Materials, started planning for an almost 30-acre expansion and manufacturer Atrium Cos signed a 120k SF lease with operations firing up in December.