At the October meeting of the Association of Industrial Real Estate Brokers, Garry Weiss, SIOR, Jones Lang LaSalle lead a discussion with four representatives of business and commerce talking about Market Factors Affecting the Real Estate User. Joining Weiss were Bruce Lubin, PrivateBank; Julian Duerschmidt, Jacobson Companies; Rick Hamilton, ProLogis; and Mark Delph, Fortune Brands.
Bruce Lubin led off the discussion acknowledging that the economy remains challenged. He characterized current conditions as a crisis of confidence, not a crisis of liquidity. “It’s a lack of confidence of what is next,” he said.
But he noted that his organization, like many others, are a liquid group and ready to lend.
It’s all about risk and uncertainty. “You don’t borrow money if you are uncertain,” Hamilton said. Today, “people are buying time until certainty comes back.”
Delph pointed out that some foreign markets, like India and China, which are in the emerging block of countries labeled as BRIC (Brazil, Russia, India and China), are still strong.
Hamilton furthered the discussion of the world economy by saying the overall fundamentals are flat globally, but they are holding up. The secondary markets, he said, are more challenged.
Lubin diagnosed the problem as the lack of business growth. But he also said the lack of growth is less about whether a company is doing well and more about looking to do more with less.
Julian Duerschmidt of the Jacobsen Companies expounded on the more with less concept saying, “Companies are doing more with their warehouses”, and doing more closer to their customers, too. He noted there is a lot of short-term activity.
Delph described how Fortune Brands transitioned from largely a manufacturing company to a consumer focus, consolidating and improving itself in the process.
Bruce suggested that companies are making money, and asking for capital growth for very specific objectives such as new equipment and real estate when the true need is there. He said in the past business decisions were based largely on projections. Today it is more about immediate needs, a “need to do it now.
But these companies are standing on the sidelines with a great deal of liquidity, he added.
Duerschmidt pointed to the leading industries, saying “automotive is steady and coming back.” He added that agricultural business, which ties into manufacturing, “is very strong.” The high-tech industry, he said, “is soft, just a tick above last year, with lots inventory” on the shelves. Other industries he characterized included healthcare, “slow and steady” and consumer/retail, “up and down.”
Playing off of that theme, ProLogis’ Hamilton said inventory levels are down from a quarter to quarter basis. “Companies,” he said, “are trying to eliminate standing inventory.”
Hamilton noted that he sees the commercial real estate markets tightening, with some market areas starting to dry up. “The good news is there is a certain level of pent up demand,” he said. “Companies need to take strategic action.”