March 9, 2020
“Development seems to be where the action is,” said HSA Commercial Real Estate CEO Robert Smietana during the “Trends and Forecasts from Industrial Industry Leaders” panel at the recent Connect Industrial Midwest. And, with the Chicago region being home to some $13 billion worth of industrial product that’s now half a century old, there’s plenty of development opportunity.
And development means looking to the future rather than the past, noted Logistics Property Company CEO Jim Martell. Take clear heights, for instance—they’re now as high as 55 feet, he pointed out. Meanwhile, older buildings can be adapted to last-touch delivery applications.
With the next generation of product coming on line, “The industrial market has a chance to accommodate people we haven’t seen before,” said Michael Brennan, chairman of Brennan Investment Group. That includes data center operators.
However, Brennan isn’t one to knock Class B and C industrial: he pointed out that these properties average 97% occupancy. “If that’s obsolete, then I want some of that,” he said.
Class B properties are also being snapped up by investors, said Ken Szady, senior leader of Marcus & Millichap’s Institutional Property Advisors division. He also noted that secondary markets are, if anything, providing a stronger return than Chicago.
“Southern Wisconsin is on fire,” said Szady. As a case in point, the Wisconsin properties in a recent portfolio sale represented lower cap rates than the portfolio’s Chicago assets.
That being the case, one of the Chicago region’s traditional strengths—its labor pool—remains a draw for industrial tenants, even as concerns about taxes may tempt them to cross the state line. ”The quality of Chicago labor helps keep companies here,” said Justin Fierz, principal of Midwest Industrial Funds. Siegel Jennings’ Molly Phelan moderated the conversation.
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