With the new decade around the corner, many in the industrial real estate industry have been considering trends and projects of recent years and focusing on what’s next in 2020 and beyond.
I caught up with a few industrial developers and construction experts before the turn of the decade to ask them about their priorities for 2020, how priorities have changed over the past few years, and what trends they anticipate will most impact the Chicago market in the coming years.
Following are insights from SIOR Chicago Platinum Sponsors, including Brian Quigley, SIOR, executive vice president – Midwest, The McShane Companies; Ryan Stoller, principal, Venture One and Matt Grusecki, senior vice president, Northern Builders, Inc.
What are your development priorities for 2020?
Brian Quigley, SIOR, McShane: One of our big priorities for 2020 is to develop smaller infill sites within dense population centers. This is in response to the recent interest we have seen from smaller end-users whose products are in high demand. We also want to focus more on underserved markets in the Chicago area that haven’t seen very many new developments in the past few decades. In 2019, we broke ground in Palatine and Prospect Heights, and in 2020 we will target similar submarkets. Lastly, we expect more tenant improvement work within our developments.
Ryan Stoller, Venture One: Venture One’s development priorities for 2020 will be to continue to focus on locating infill parcels to redevelop and deliver speculative facilities to respond to the market’s record-low vacancy. We believe there is ample tenant demand in most submarkets for more modern development. Additionally, we will continue to execute on our build-to-suit strategy by providing users buildings to their exact specifications at a competitive cost.
Matt Grusecki, Northern: Northern’s top priority is to meet all of our current obligations to deliver several projects in the first quarter of the year. Concurrently, our team is working hard to launch seven new projects this May. This means utilizing these winter months to complete land studies, finalize building programs, and securing permits in advance for spring construction.
How do your 2020 priorities compare to what you were focused on in 2018 and 2019?
Quigley: Over the past two years, we have prioritized developing in some of Chicago’s most popular submarkets. By adding a focus on underserved markets, we hope to improve commerce in these municipalities and add valuable real estate. Additionally, we want to continue to focus even more on developing in areas that have very strong labor markets surrounding them.
Stoller: Venture One’s 2020 development priorities will be very similar to the last few years. We have seen a need for last mile, urban logistics facilities for the last few years and have focused on delivering these types of facilities. In 2020 we will continue to focus on this strategy. Our project in Glendale Heights is a good example of Venture One executing on this strategy.
Grusecki: Our development priorities have not changed much over the last two years, but managing in-house resources has. 2019 was a record year for Northern in its 93-year history. As such, we’ve made considerable investments in hiring several talented professionals in pre-construction services, sales and field operations. Doing so has allowed us to grow the business while maintaining our high-quality standards. Our team remains our greatest resource.
What industry trend do you think will have the most profound effect on the Chicago market and/or your own business?
Quigley: Rising construction costs are a trend that affects nearly everyone in the Chicago market. We are fortunate in the fact that we have our own in-house construction company that is able to work with us at every stage of the construction process to keep costs in check.
Stoller: While Venture One has focused on developing smaller, last-mile urban facilities for the last few years, we believe the tenant and developer market has caught on to this requirement. While we anticipate more competition in securing these types of sites for development, we also anticipate more end users focusing on their need to locate in these facilities in order to better serve their customers.
Grusecki: The only constant in industrial development is change. Today, there’s tremendous access to capital in the market coming from new sources; in addition to institutional investors, we’re seeing entrepreneurial private investors and family offices expanding into the industrial space.
While macro-economic factors and trends are important indicators of where we may be headed, I consistently remind our team that it only takes one decision-maker to say yes. Just one. This is a personal business and its paramount to always put our clients first.
Overall, it seems like our development community remains bullish on industrial demand, though perhaps with a shifted focus towards more niche, infill and specialized types of projects rather than large bulk speculative facilities.
About the author
Dan Benassi, SIOR, Principal at Entre Commercial Realty, is the 2019 SIOR Chicago Chapter President. The McShane Companies, Venture One and Northern Builders are all 2019 Platinum Sponsors of the SIOR Chicago Chapter.