Johannson (Jojo) Yap, chief investment officer, for Chicago-based First Industrial Realty Trust, is excited about the strength of the industrial industry in and around Chicago. In an interview with Illinois Real Estate Journal, Yap said that having worked in the competitive real estate business for more than 25 years, there has never been a dull day.
Yap’s start in the real estate industry began when he joined a private investment group right out of graduate school as an associate in the late eighties.
“My role there was to assist that investment group to acquire value- added office, retail, and industrial properties in the Chicago area,” he said. “I did that for a number of years before primarily focusing my time in the industrial market, when the group took their industrial platform public in June of 1994.”
Since then Yap has sustained in the industry with a successful career.
Having been in the industry for more than 25 years, he has had many experiences and gained much knowledge about the industrial market. Which is why it is no surprise that he believes the current market is strong.
“I think it is strong overall,” Yap said. “In terms of the investment market, the demand for the properties is robust. In fact, year over year to date, the sale of industrial properties, in turns of volume is up twenty-five percent. In terms of portfolio sales it’s doubled. Another measure we use to track demand is cap rates, and cap rates continue to trend down, which shows you another support for the strength of demand.”
Yap says in terms of the actual tenant demand, it’s been growing in line with the economy.
“There continues to be positive absorption; in fact it has been about 15 quarters of net positive absorption, and because of the favorable fundamentals, market rents have also continued to recover. Rental rates have continued to increase across the nation, but there is still room to grow, because in most markets it is still below the peak.”
“Rents are increasing across the sector; therefore development is now increasing with activity from investors like us, but it is still well below the historical levels.”
Finding quality leased acquisitions is a focus of First Industrial and what Yap finds most challenging about the industry because there is so much competition and a strong demand for high quality buildings.
“A good thing about that demand is it has positive implications for the value of our portfolio,” Yap said. “Yet that doesn’t mean we have stopped looking. We continue to look out for primarily quality bulk and regional distribution centers, and our focus is more on the long term rent growth potential of these buildings. Again, it is very competitive so we have to be disciplined in our approach.”
Despite the competition in the industry, the company has had some recent successful closings and lease signings. One of the most recent is a 509,000 square foot, Class A, property they bought in Joliet located east of the intersection of interstates I-55 and I-80.
“We expect that property to be in continued demand for users in the marketplace,” he said. “Late last year in the fourth quarter, we acquired a 627,000 square foot, Class A, building in southeast Wisconsin. That’s a $26.3 million leased investment and we’re very pleased with that. We recently announced the lease-up of our 708,000 square foot, First Logistics Center @ I-83 in York, Pennsylvania, and also our 43,500 square foot building, located in the South Bay submarket of Los Angeles, that we call First Figueroa Logistics Center.”
Yap says not all investors can do what First Industrial does when it comes to investments. What sets First Industrial apart is the fact that they have boots on the ground, and a wide platform that is vertically integrated.
“We have focused a bit more on development because we can generate higher quality buildings, and higher risk- adjusted returns through development. Within the past six months we have made about $200 million of investments in development.”
According to Yap there is never a dull day in his line of work, which is what he enjoys most about the industry.
“Almost every company in the nation that produces or distributes physical goods, needs industrial real estate,” he said. “Just imagine the breadth of customers and the interesting productive things that happen in every building whether it’s just distribution or light assemblage.”
Not only does the competitiveness of the industry keep Yap and his focused team interested in their work, it’s also the fact that they spend a lot of time during the day trying to develop solutions for the customers.
“Whether it’s a lease or development solution, we try to do that and negotiate and structure those solutions to meet our customer’s needs. What we do is look for opportunities across our platform across the nation. Every day we look for another piece of industrial property where we see trends are favorable, or a piece of land where we can develop to meet the market’s need.”
After a long, enjoyable day at work, Yap likes to go home and spend time with his family.
“I spend my free time with my family,” he said. “It’s nice to hang around them. I try to get them to spend time with me playing either tennis or golf. We all have the same hobbies so we are together regardless of the activity.”