The pace of U.S. industrial growth has skyrocketed over the past 18 months, but as banks cut back on lending and early signs of declining demand begin to materialize, the bone-weary developer community quickly rallied. may take a breather.
There was a record 717 million SFs of industrial projects under construction in the US in the third quarter, and strong tenant demand has kept vacancy rates in the low single digits so far. data from cushman and wakefieldInventories continue to be tight, easing near-term concerns of overbuilding, according to the report.
But a growing reluctance to take on new projects, especially among large institutional banks, will make it much harder to get construction loans and supply will be added to the pipeline in the coming months. shows a significant decrease.
with hicks Link logistics real estate With Brian Stroll, Vice President of Development Prologis Jonathan Ludersdorf, President of the Central Region, spoke on a panel at the Society of Industrial and Office Realtors’ CREate 360 conference on October 20 at the Omni Hotel in Dallas, discussing how their respective companies are impacted by macroeconomic challenges. I talked about how I was influenced by
By and large, companies have slashed or suspended speculative projects altogether. institutional capitalPrologis announced Extensive shift to build-to-suit Speaking on the company’s third quarter earnings call, Strohl said: rising interest rates By putting upward pressure on the cap rate, the link also kept the specs down.
“Uncertainty is a problem,” says Strohl. “It’s one thing if we knew what the cap rate was and what was going to happen, but we don’t know.”
Rudersdorf said the lack of clarity on values is likely to cause land prices to reset.Lack of developable sites pushed prices up almost 40% Between mid-2020 and 2021, those costs will continue to rise, according to the company. Newmark.
“The land value absolutely needs to be reset to 30%,” Rudersdorf said. I guess.”
Tal Hicks of Hillwood Investment Properties and Jonathan Rudersdorf of Prologis spoke on industrial development at the SIOR 2022 CREate 360 conference in Dallas.
Hesitation to the capital market is not the only factor that slows down industrial development. As the demand for faster delivery places fulfillment centers closer to home, NIMBYism is starting to lose momentum.
“They want the goods in 15 minutes, they don’t want the building or the truck,” says Strohl. “If you stop ordering goods, the building won’t come near you. But that’s not how it works.”
According to Rudersdorf, qualifying new projects is becoming one of the biggest pain points for the industry. Developers should be prepared to articulate why the project is necessary, and be prepared to make sacrifices along the way.
“Compared to other traditional product types, there is less impact on city services,” Rudersdorf said of the advantages of industrial products. “We will provide a stable product tax, which is a big part of the equation. We need to understand what municipalities and communities want and be part of the conversation.”
Panel discussion focusing on the current state of industrial development in the United States
Warehouse and logistics space continues to lease up at breakneck speed, especially ahead of the year-end and New Year holidays.
But trends in other sectors, such as the turmoil in the housing market and the growing right-sizing trend in retail, could be signs that demand for industrial space will cool in the coming months, says Rudersdorf. says Mr.
“No one thinks there will be some adjustment to demand,” he said. “We are still in a very low vacancy environment … we can sustain slight fluctuations in demand.”
A burgeoning group of tenants looking for space in a tight spot could lead the industry into recession, Strohl said. Link has noticed a growing need for warehouses ranging from 15,000 SF to he 20,000 SF. e-commerce like a giant Amazon.
It could also prove to be an opportune moment the moment most large users find themselves hitting the brakes.
“Hopefully that will boost the market going forward,” Strohl said. “There is a lot of small business economics that is still going strong.”