(Read more on the industrial market.)

LONG BEACH, CA-Commercial real estate experts gave the industrial sector a bullish long-term prognostication at yesterday's annual RealShare Industrial West conference, held at the Hyatt Regency. They pointed to a growing global marketplace and increased efficiencies in logistics among the many reasons for the optimism.

Admittedly, the industrial sector has held up relatively well in the wake of the credit crunch. According to Aaron Paris, EVP at Dermody Partners, rents up are significantly in some Western markets. "In Las Vegas, rents are up 35%," Paris said during a Town Hall Meeting. "We've seen [increases] in Portland, OR and Tacoma, WA as well."

However, while the rents are riding a crest, a slowing economy could pinch the industry in the short term. Some panelists said signs are already materializing, while predicting the bad news to really take hold next year. "My view toward the end of 2008 is very pessimistic," said Paris. "An economy stagnant at 1.5% growth is not the type of growth you want for a healthy industrial market."

A dreadful housing market has already begun affecting certain industrial niches, according to Jeff Morgan, SVP with CB Richard Ellis and the Town Hall Meeting's moderator. Morgan, who is part of CBRE's global supply chain practice, said the subprime slump has created a slowdown in furniture orders, leaving gaps in warehouse space.

As the panelists pointed out, low-end furniture, being bought by immigrants or illegal immigrants, has fallen off the cliff as they're not sure of their future of being in the US. Paris said he's seeing a "bifurcation in society. Wal-Mart shoppers are taking a significant hit with the high energy prices; for us [in attendance] it's an inconvenience."

Phil Bowman, SVP with First Industrial Realty Trust, said the investment market has also seen some hits. "In recent years, we've seen lots of buyers. Leasing is more en vogue right now. There's also been a flight to quality."

Keynote speaker Curtis Spencer, president of IMS Worldwide, an international consulting firm specializing in foreign trade zones, economic development and industrial park development, has begun identifying certain squishy market fundamentals taking place.

"Steamship companies love the 'peak' season," he said. The holiday season, with potential presents being shipped from the manufacturing of Chinese-based toys and other goods, offer opportunities for steamship companies to tack on additional fees. Unfortunately, Spencer said, "Q3 did not see a peak."

While some news was dour yesterday, not everyone shared in the pessimism. Jason Choulochas, senior regional director for Wrightwood Capital, said the credit markets should come back recharged by Q2 2008. He added that there's $13 billion of industrial product on the market. The key question to answer will be, "when will it transact; when will it close?"

One other silver lining, according to Bowman is a result of the housing slump. "The slowdown in residential construction has brought more stabilization to material costs excluding petroleum. We're no longer seeing products increasing at the same rates."

More than 250 industry professionals were in attendance at the conference where other topics included panels on: buying and selling trends; trends and opportunities in the Mexican border market; and the greening of industrial real estate.

The conference is produced by Real Estate Media, publishers of GlobeSt.com, Real Estate Forum and Real Estate Southern California.

Instant Insights /

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