NAIOP's I.con Digs Deep for Answers

LOS ANGELES-Day two of NAIOP's I.con: The Industrial Conference offered an inside look at the nitty-gritty nomenclature of industrial projects, as panelists discussed ports, industrial development cycles, infill development and pricing strategies.

While early panelists joked about the morning-after blahs from their big Wednesday night out on the town in L.A., things quickly returned to business for the “Inland Ports and the Battle of the Midwest” panel that kicked off the day's sessions.

Moderated by Curtis Magleby, senior managing director, regional head–US capital markets West, Cushman & Wakefield of California, Inc., the panel explored the viability of inland ports. “Markets with intermodal facilities have the highest rent growth,” Magleby said.

The two panel experts detailed their pet intermodal hubs and explained why they were viable alternatives to coastal projects. Michael Berry, president of Hillwood Properties, presented on the Alliance Texas hub near Fort Worth, Texas, a site offering 17 million square feet spread over 17,000 acres.

The property houses numerous wireless technology firms and Asian-based companies, with Google recently committing to space and Amazon commanding a 1.1-million-square- foot fulfillment center. All were attracted by the proximity to two airports and highhways, but “they are here because of the labor market and the integration of transportation,” Berry said. He added that sales for the site typically begin with talking about the land, costs, and labor market, and then turns to negotiations about the actual real estate.

Stephen Crosby, president of CSX Real Property Inc., noted that the Panama Canal reopening in 2015 “would clearly have an impact. It will happen more gradually than people think,” he added. “Expect it to be a dynamic situation.”

Crosby also noted the growing number of products being transported by rail, saying that North Dakota crude oil is transported via that method to the New York metropolitan area. “We're building terminals for crude by rail and produce,” said Crosby, adding, “the economy is in not bad shape. It's not booming, but there's still a lot of upside."

On the “Dissecting the Current Industrial Development Cycle” panel, moderator Paul Earnhart, SVP of Lee & Associates, noted that the development business has morphed from one where local entrepreneurs put up a building and took a chance to a more formal and global business.

John Magness, SVP/director, Hillwood Investment Properties West Coast, Hillwood, Perot Co., echoed that notion, saying the numbers of true developers has “shrunken considerably,” while the number of buyers has increased.” He later noted that “post-recession, the player have changed, the banks and lenders have changed.” The access for smaller developers is thus “a little harder,” he said.

Kim Snyder, president of the Southwest region for Prologis, said his firm looks “at everything as a 10-to-12 year hold,” and remarked how the “institutionalization” of the business has been rapid. He said later in the panel that he didn't “see the small guy coming back,” but noted the possibility for them to do smaller infill projects.

Joseph Trinkle, SVP and regional director for Liberty Property Trust, said new construction starts “are below historical norms,” and said there was some 50-million to 60-million square feet of “obsolete property” that was also coming on the market each years. “There's room to grow rents in some markets,” he said, noting that in some areas, rents were “back to peak.”

The panel on “The Future of Industrial Infill Development: Overcoming the Challenges of Brownfields and Sustainability Goals” saw Bradley Cox, senior managing director, Trammell Crow Co., and Stuart Lichter, president and chairman of the board, Industrial Realty Group LLC, highlight some of their pet projects.

Cox talked about the Branford project in the North East San Fernando Valley. The region presents “a very challenging market,” he said, with substantial environmental and entitlement challenges. The property was originally acquired at a bank auction. After working through the machinations of 14 different agencies, Trammell Crow finally sold to a developer who built a FedEx hub, creating 200 jobs.

He also detailed the Carson Industrial Center North (“in and out in 13 months”) and the the downtown L.A. CleanTech Corridor, which will be the first industrial project in downtown L.A. in 20 years. Cox used the CleanTech project to emphasize his point: “In L.A, you have to be creative and extremely patient.”

Lichter talked about the revamped of the Akron, OH. headquarters of Goodyear, His firm managed to be creative by building a new headquarters on the site so that the company is “paying no more than they were in the old building," while converting the old headquarters building into a new atrium and creating office and residential space.

He also pointed out the Industrial Realty Group triumph with McClellan Business Park in Sacramento. The former Air Force base had many environmental issues and 650 buildings, 750 houses and 1.5 million square feet of empty hangar space. Today, over 200 companies are on the site generating 15,000 jobs, and the empty hangar space is housing Silicon Valley tech firm jets, with Industrial Realty Group devising yet another revenue stream by selling those planes their fuel.

Concluding the event was the “Shark Tank” panel, moderated by Darla Longo, the vice chairman of CBRE. The session allowed three developers to present their projects to a panel as if they were pitching to obtain equity capital. The serious topic was enlivened by occasional levity and some sharp questioning, as the gloves came off to provide an in-depth look at how development and investment decisions are made.

Presenting were Tom McNearney, CIO of Transwestern, who pitched the Mason Creek Distribution Center in Houston; Andrew Mele, principal of Trammell Crow Co., who talked about the Hanover Ridge Trade Center; and Timur Mecimer, president/CEO, Overton Moore Properties, whose project of choice was the Southwest Industrial Park in Fontana, CA.

Critiquing the presentations were Matthew Brodnik, director of capital markets, Exeter Property Group; David Buck, managing director, USAA Real Estate Co., and Dayton Conklin, SVP investments, Clarion Partners.

GlobeSt.com also covered the first-day activities at NAIOP's I.con: The Industrial Conference, which featured several panels that discussed e-commerce.