LOS ANGELES—Life companies are itching to get industrial deals, according to Michael Tanner, EVP at PSRS, a capital markets firm that specializes in life company lenders. Tanner says that life companies are aggressively diversifying into industrial product, and—partially because of ecommerce—they will take almost any meal. To find out more, we sat down with Tanner for an exclusive interview.
GlobeSt.com: Why are life company lenders interested in industrial product?
Tanner: Across the nation, industrial rents are good and vacancy rates are down. It is performing well, and lenders can't seem to get enough of it. A lot of retailers are turning their stores into showrooms and then selling out of ecommerce sites. Most of the product in stores sits in warehouses and is delivered to customers' homes. Retailers don't have the stock or the back rooms that they used to have.
GlobeSt.com: Is the increased lender interest the result of the ecommerce boom?
Tanner: It hasn't necessarily gone hand-in-hand with ecommerce. For a long time, the economy was financing the growth of retail, and a lot of lenders are starting to get over exposed in retail. In light of the headlines, lenders are starting to shift way from retail into other stuff. So it is both an exposure issue on top of concerns about the viability of retail going forward.
GlobeSt.com: Are lenders mostly interested in warehousing space or will these lenders also take manufacturing?
Tanner: Everybody wants big warehouse space, and everyone is lending on that product type. A lot of guys will do the incubator space, which is a little more rare. Generally speaking, life companies are really interested in manufacturing space. Bulk distribution is really what everyone is really excited about.
GlobeSt.com: What is your outlook for the market?
Tanner: Industrial building loans are $60 per foot, so you need a building that is twice the size of an office to get a similar loan. It is hard for lenders to find opportunities. For that reason, we don't really rely on sales for our transaction volume, because guys are refinancing every few years, generally speaking. Those loans are coming up and rolling often enough that even if there aren't a lot of sales transactions, we still have opportunities to put loans on industrial space. It is a very competitive market.
LOS ANGELES—Life companies are itching to get industrial deals, according to Michael Tanner, EVP at PSRS, a capital markets firm that specializes in life company lenders. Tanner says that life companies are aggressively diversifying into industrial product, and—partially because of ecommerce—they will take almost any meal. To find out more, we sat down with Tanner for an exclusive interview.
GlobeSt.com: Why are life company lenders interested in industrial product?
Tanner: Across the nation, industrial rents are good and vacancy rates are down. It is performing well, and lenders can't seem to get enough of it. A lot of retailers are turning their stores into showrooms and then selling out of ecommerce sites. Most of the product in stores sits in warehouses and is delivered to customers' homes. Retailers don't have the stock or the back rooms that they used to have.
GlobeSt.com: Is the increased lender interest the result of the ecommerce boom?
Tanner: It hasn't necessarily gone hand-in-hand with ecommerce. For a long time, the economy was financing the growth of retail, and a lot of lenders are starting to get over exposed in retail. In light of the headlines, lenders are starting to shift way from retail into other stuff. So it is both an exposure issue on top of concerns about the viability of retail going forward.
GlobeSt.com: Are lenders mostly interested in warehousing space or will these lenders also take manufacturing?
Tanner: Everybody wants big warehouse space, and everyone is lending on that product type. A lot of guys will do the incubator space, which is a little more rare. Generally speaking, life companies are really interested in manufacturing space. Bulk distribution is really what everyone is really excited about.
GlobeSt.com: What is your outlook for the market?
Tanner: Industrial building loans are $60 per foot, so you need a building that is twice the size of an office to get a similar loan. It is hard for lenders to find opportunities. For that reason, we don't really rely on sales for our transaction volume, because guys are refinancing every few years, generally speaking. Those loans are coming up and rolling often enough that even if there aren't a lot of sales transactions, we still have opportunities to put loans on industrial space. It is a very competitive market.
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