The Trump Administration Could Impact Industrial

LOS ANGELES—While we will have to wait for president-elect Donald Trump's inauguration in January to begin to see the impact his presidency will have on the real estate market, his policy suggestions will have a major impact on supply/demand dynamics, according to Ray Kivett, managing director of investments at American Realty Advisors. Kivett says that if Trump's proposed changes to trade, immigration and lending are implemented, they will cause a reduced demand for logistics real estate and a downward shift on imports and exports. To find out more about how the next administration might impact the industrial market, the industrial forecast for 2017 and to get an inside look at American Realty's industrial strategy, we sat down with Kivett for an exclusive interview.

GlobeSt.com: What is your industrial acquisition strategy, and how has it evolved to keep up with the current market conditions?

Ray Kivett: Our industrial strategy has a broad based approach that includes a focus on both core and value-added assets. All of our industrial strategies across the risk/return spectrum have a few traits in common.  First, we target facilities that are strategically located directly within the path of goods movement, as it is critical to have well-located facilities that serve the market, whether on a national, regional, or local basis.  In addition to location, we focus on making sure that each facility possesses, or can be altered to possess, the key physical functionality attributes that are needed by the tenants, such as 36' clear heights on a large national or regional facility or the ability to have a long line of Uber drivers come right through the building for package pickup and delivery to consumers in the densest infill locations.

Specifically, we are looking at infill locations within supply-constrained markets with multiple demand drivers.  For gateway markets, we like sea, inland air and rail, or intermodal markets with high goods movement.  We also target facilities that serve as distribution centers for delivering goods to surrounding markets and end users, as well as infill distribution centers that focus on last-mile warehousing.

In certain markets, there are good opportunities in ground-up development and in near term lease-up opportunities for vacant or soon to be vacant properties.

GlobeSt.com: Will the new administration have an impact on the industrial market, especially if changes regarding trade are implemented?

Kivett: There may be an impact on industrial supply and demand dynamics if proposed changes regarding trade, immigration, and lending are put into place; however, it is simply too early to tell which campaign proposals will be pursued and to what extent the proposed changes will be implemented.

Should the proposed trade changes that include a renegotiated NAFTA Agreement, pulling out of TPP, labeling China as a currency manipulator, or increasing tariffs with a variety of trading partners, there would likely be a downward shift in imports and exports.  Should these policies be put in place, industrial real estate related to logistics may see reduced demand.  This effect would be most acute in the major port markets for international trade flows like Los Angeles /Long Beach, as well as Seattle, New Jersey, and Houston.  Inland ports such as Chicago would also likely see an adverse impact.

In addition to trade, any significant immigration deportation would likely have a negative impact on industrial ranging from reduced construction labor supply leading to increased development costs and warehouse labor shortages leading to increased costs of operation.

GlobeSt.com: How will the industrial market in 2017 compare to 2016?

Kivett: The industrial market can currently be characterized as having favorable supply/demand characteristics including historical lows in vacancy, strong current and projected absorption, and supportive capital flows, all of which bode well for 2017.  National fundamentals continue to look good as supply, except in a few markets is in balance with demand.  In the absence of any significant changes to trade and/or immigration policy, we do not expect a significant change in property fundamentals in 2017.

LOS ANGELES—While we will have to wait for president-elect Donald Trump's inauguration in January to begin to see the impact his presidency will have on the real estate market, his policy suggestions will have a major impact on supply/demand dynamics, according to Ray Kivett, managing director of investments at American Realty Advisors. Kivett says that if Trump's proposed changes to trade, immigration and lending are implemented, they will cause a reduced demand for logistics real estate and a downward shift on imports and exports. To find out more about how the next administration might impact the industrial market, the industrial forecast for 2017 and to get an inside look at American Realty's industrial strategy, we sat down with Kivett for an exclusive interview.

GlobeSt.com: What is your industrial acquisition strategy, and how has it evolved to keep up with the current market conditions?

Ray Kivett: Our industrial strategy has a broad based approach that includes a focus on both core and value-added assets. All of our industrial strategies across the risk/return spectrum have a few traits in common.  First, we target facilities that are strategically located directly within the path of goods movement, as it is critical to have well-located facilities that serve the market, whether on a national, regional, or local basis.  In addition to location, we focus on making sure that each facility possesses, or can be altered to possess, the key physical functionality attributes that are needed by the tenants, such as 36' clear heights on a large national or regional facility or the ability to have a long line of Uber drivers come right through the building for package pickup and delivery to consumers in the densest infill locations.

Specifically, we are looking at infill locations within supply-constrained markets with multiple demand drivers.  For gateway markets, we like sea, inland air and rail, or intermodal markets with high goods movement.  We also target facilities that serve as distribution centers for delivering goods to surrounding markets and end users, as well as infill distribution centers that focus on last-mile warehousing.

In certain markets, there are good opportunities in ground-up development and in near term lease-up opportunities for vacant or soon to be vacant properties.

GlobeSt.com: Will the new administration have an impact on the industrial market, especially if changes regarding trade are implemented?

Kivett: There may be an impact on industrial supply and demand dynamics if proposed changes regarding trade, immigration, and lending are put into place; however, it is simply too early to tell which campaign proposals will be pursued and to what extent the proposed changes will be implemented.

Should the proposed trade changes that include a renegotiated NAFTA Agreement, pulling out of TPP, labeling China as a currency manipulator, or increasing tariffs with a variety of trading partners, there would likely be a downward shift in imports and exports.  Should these policies be put in place, industrial real estate related to logistics may see reduced demand.  This effect would be most acute in the major port markets for international trade flows like Los Angeles /Long Beach, as well as Seattle, New Jersey, and Houston.  Inland ports such as Chicago would also likely see an adverse impact.

In addition to trade, any significant immigration deportation would likely have a negative impact on industrial ranging from reduced construction labor supply leading to increased development costs and warehouse labor shortages leading to increased costs of operation.

GlobeSt.com: How will the industrial market in 2017 compare to 2016?

Kivett: The industrial market can currently be characterized as having favorable supply/demand characteristics including historical lows in vacancy, strong current and projected absorption, and supportive capital flows, all of which bode well for 2017.  National fundamentals continue to look good as supply, except in a few markets is in balance with demand.  In the absence of any significant changes to trade and/or immigration policy, we do not expect a significant change in property fundamentals in 2017.