MIAMI—The industrial market is getting hot all over. Indeed, it’s white hot in Miami and the momentum is spilling over into other pockets of the US as the recovery continues.
In this exclusive two-part interview, GlobeSt.com caught up with Steve Medwin, a managing director at Jones Lang LaSalle, to get his take on what he’s seeing on the industrial leasing front. We asked him if it’s easier or more difficult to get deals done, what tenants are looking for and more.
GlobeSt.com: What have you seen on the industrial leasing front in the past 12 months. It looks like a general uptick in many markets.
Medwin: It is. There are certainly markets that are rebounding more strongly than others. They tend to be the port cities. Southern California, Northern New Jersey, South Florida, and Houston are all very active markets. We are starting to see an increase even in the secondary markets like the Indianapolis and Kansas City as the recovery starts to hit the middle of the country.
GlobeSt.com: Is the state of the market making it easier or more difficult to get industrial leases done?
Medwin: There has been a pretty big push to larger distribution centers. In the last 18 months or so that market is very active—the 500,000- to, say, 2 million-square-foot build-to-suits where you can spec construction.
The economy has rebounded. We just finished a couple of large leases—2.5 million feet for one retailer and two different deals of 1.5 million square feet for a consumer products company, a big global name.
That’s a pretty good sign of what is happening in corporate America with big firms consolidating their facilities into larger industrial buildings to get some economies of scale and savings efficiencies. That’s a new trend that had not been prevalent three or four years ago when the economy was in the doldrums. That’s been interesting to see.
In most cases a lot of those secondary markets have abundant supply of land so it’s fairly easier to secure enough land to build a 1.5 million-square-foot distribution center there than in Miami, Northern New Jersey, or Southern California where you tend to have more land-constrained markets.
It’s more important that people are creative in how they uncover sites that they can utilize for industrial development because as you probably would imagine there are certain cities that you would prefer not to have industrial mayhem. They prefer to have nice offices and retail and residential, so you have fewer options for industrial land. So it’s been the groups that are getting more creative in those supply-constrained markets that have really succeeded.
GlobeSt.com: Are industrial tenants looking for particular features in a building? Are there certain trends in what tenants really want?
Medwin: The national and global tenants tend to have more stringent requirements. So, for instance, they want to look at buildings that are at least 30-foot clear ceiling height. They have certain requirements and they try to replicate that around the country. But at the end of the day, small markets or regional markets like Miami or Pittsburgh are still not distributing to a 500-mile radius. Tenants in those markets tend to be less choosy. They can live with lower ceiling heights or fewer doors. So there’s a bifurcated market.
GlobeSt.com: What factors influence your industrial leasing strategy?
Medwin: It’s market dependent. In northeast Pennsylvania where most of the big box distribution centers are going—or in northeastern New York and all the rest in New England—it’s really all about finding big space.
That’s a much different market than Miami, where at the end of the road international trade plays a role. In Miami you get a whole different set of dynamics and it’s more about being agile and being able to maneuver quickly to get buildings prepared in a timely manner for somebody who’s making more of a last-minute decision than these big million-foot to 2 million-square foot build-to-suits where the company had planned for this for years and is executing in a more methodical fashion.
So it really depends on which end of the business you’re focusing on or which particular deal or asset or client you’re working with as to how you adjust that strategy. You have to be aware of the fact that they’re different and be able to adapt.
GlobeSt.com: So you really need to know you your market. You really need to know your tenants, the landlord, etc.
Medwin: Exactly. Also, being creative. There may be an opportunity where you know there’s a tenant that needs a certain building or a certain location. You happen to know of a parcel of land that could be for re-purposed or made available for redevelopment. It’s being creative that way and coming with a solution.
Be sure to come back this afternoon to read part two of our exclusive interview.