Are We Headed for Sustained Negative Growth?

LOS ANGELES—After showing off some successful deals from the last year, industrial experts on the Deals and Dealmakers panel at RealShare Industrial West took a moment to ponder the challenges in the year ahead. While most of them didn't see a cliff in the future, like 2008, most did expect a slowdown in the year ahead. "I don't think that we are going to fall off a cliff. I wouldn't be surprised if we had long term sustained negative growth, which might be more painful," Andrew Van Tuyle, chief acquisitions officer at BH Properties, said on the panel.

Moderated by Brad Neilson, partner at Alan Matkins, the Deals and Dealmakers panel included Erik Larson, EVP at Cushman & Wakefield; Larry Lukanish, SVP of commercial development at Sares Regis; and Jonathan Pharris, co-founder and director of acquisitions at CapRock Partners.

Van Tuyle added, "We are still going to be active, and do what we have to in order to get it done." The sentiment was shared by the remainder of the panelists, who all still planned to be active in the year ahead, except for Lukanish. "We probably won't do as many deals this year. We are very sensitive about delivering into a down market," he said, adding that the presidential election and the changing regulatory environment are the biggest risks in the year ahead.

While there may be a slowdown, it is certain that currently, the competition for product is steep. Lukanish maintained his stance that no matter the other variables, you always need the highest price, while the other panelists said that investors should find ways to differentiate themselves. "We have picked buyers that aren't the highest bidder, but they need to have something to differentiate themselves, even if it isn't the highest price," said Larson. While Van Tuyle said the speed was their competitive advantage. "We do due diligence ahs fast as we can. You have to be a great buyer for sellers and for brokers," he explained.

In terms of surviving a downturn and staying competitive, Pharris said that knowing your investment strategy is the key. "You have to go after the right property for your company," he said. "You have to be targeting the right assets. For us, if there are going to be a lot of bidders, that probably isn't the right fit for our company because we go after the properties that have more issues. You really have to look at how your capital is structured and the properties that work best."

The economy was a hot topic at the conference. On an earlier panel, industrial investors also talked about potential economic issues in the future.