Insights from industrial experts at NAIOP I.CON West

Industrial commercial real estate professionals present on a panel at NAIOP ICON West conference

The industrial sector has been a beacon of resilience and growth for commercial real estate in recent years. Industry experts gathered at NAIOP I.CON West on March 11 and 12, 2024 to discuss the sector's performance and outlook, shedding light on key trends and projections that are shaping the landscape in 2024. While there, Dawn McCombs, Principal and Denver lead industrial specialist for Avison Young, hosted a panel to discuss the driving factors for industrial development in the Western U.S.

Dawn started the discussion by highlighting the sector's journey since the pandemic, noting a huge surge in demand between 2020 and 2022, which resulted in historic vacancies, rent growth, and record deliveries. However, by 2023, operating fundamentals began to normalize, and construction starts declined, impacting vacancy and absorption rates.

The panel discussed the significant decline in development starts across the U.S., dropping by 65% year-over-year, as noted by Megan Creecy-Herman, president of Prologis' U.S. West Region. Despite this, she anticipated an improvement in market fundamentals, with the U.S. vacancy rate ending 2023 at a healthy rate of about 5%.

Industrial commercial real estate professionals pose after NAIOP ICON West panel

Zooming in on the construction landscape in Salt Lake City, Angela Eldredge, chief operations officer at Price Real Estate, discussed how the market experienced a pause in construction starts, which helped normalize market conditions. She highlighted how lead times for construction materials typically range between 12-18 months, while in California, entitlement can take around 24-36 months from start to finish, according to Brooke Birtcher Gustafson, fifth-generation president of Birtcher Development. Brooke also shared mid-pandemic predictions suggested a need for 1 billion square feet of new product to meet tenant demand, leading to an opportunity for investors.

Despite tenant challenges such as supply chain issues and labor shortages, Dawn highlighted a heightened demand for goods. Reon Roski, CEO of Majestic Realty Co, noted port and population shifts and the effects of manufacturing near-shoring in Mexico, while companies also seek to diversify their port strategies. Reon also touched on the current pressure on ports due to union contract negotiations.

Megan brought up the interconnectedness and interdependence of markets in the Southwest, nodding to strategic expansions into growing markets and a shift in investment strategies. Despite challenges, there is optimism moving forward in 2024, with expectations of normalized market conditions and opportunities for investors, developers, and tenants.

  • Principal
  • Industrial, Sales & Leasing, Tenant Representation

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