By Matt Dornak, Managing Director, Stream Realty Partners
This article first appeared in D Magazine’s CRE Opinion section.
Volatility within the industrial market isn’t anything new. After a robust season, 2020 caused many clients to put their pencils down and pause, concerned about the future. We understood their hesitation, which was mostly driven by COVID, shutdowns, and layoffs. However, rather than become paralyzed by uncharted territory, we dove into action–analyzing demand inquiries, RFP submissions, and transaction types to provide the most accurate and detailed information on the market.
Surprisingly enough, our findings weren’t the doom and gloom anticipated. It quickly became evident that demand was growing–steadily. As such, we advised our clients to pick their pencils back up and move forward, which they did, without much hesitation.
Now, as we move forward during this next season of uncertainty, it’s evident that some markets and building types are continuing to progress while others are flattening or declining. So, what can real estate professionals do?
Build A Lasting Portfolio
Information and hustle are key to staying ahead of the competition in an ever-changing market. Market data that is well-rounded and deeply rooted in a particular submarket is crucial while determining correlations between more significant data points. This kind of knowledge is gathered not only by evaluating databases but by taking the time to understand what the marketplace needs. It’s why I make sure our team of 26 brokers spend the productive hours of the working week immersed in their submarkets: making calls, identifying opportunities, and gathering information. It’s the only way to build a lasting pipeline or portfolio.
Know Your Submarket Like Your Neighborhood
While data is imperative–and we have the latest and greatest at our fingertips–it doesn’t trump boots-on-the-ground information obtained firsthand. Our team makes a point to drive through each submarket monthly–minimum, analyzing construction project timing and market needs firsthand (while using our data pulls as a resource). And, because our brokers spend time within their submarkets almost daily, we have a real-time understanding of each submarket’s saturation, demand, and development pipeline–resulting in sound investment recommendations for our clients.
Engaging with tenants and building owners in each submarket is important to keep a finger on the market’s pulse. There is no better way to gain insight into a micro market and the demand and direction in which the market is moving. Engagement means phone calls, in-person meetings, and other small interactions that over time foster long-term relationships. We take the time to dive in and understand our clients’ goals and provide innovative solutions to meet them–which is what clients want and need.
Data: Past, Present, And Future
Using data to understand the supply and demand pipeline surrounding development is vital–however, there is a need to remain flexible. While we work to provide forecasts that are six to twelve months out, we understand that the market can change instantly. For that reason, we choose to track real-time data for lease, sale, land comps, and construction and deliveries. Keeping tabs on the data allows us to better understand actual absorption, growth trends, and supply/demand balance through three lenses: the past, the present, and the future. We use the information to create comp databases and individual reports that function for a specific project, period, location, or product type. Not only does this help us make sound recommendations for our clients, but it ultimately allows us to identify, drive, and win business.
Tell An Asset’s Story
Strategic marketing differentiates an asset from the competition, regardless of the market’s position. Our team works fervently to brand each asset in a way that maximizes value–pushing the envelope to increase exposure and engagement. Data, combined with a deep, personal understanding of the market and tenant tendencies, is what helps us capture the larger story.
Information Is King–Stay Current
Being able to answer a client’s question honestly, thoroughly, and accurately is essential. This requires a comprehensive and current knowledge of data, markets, and the broader economy. For example, the question that everybody is asking into today’s market is if Dallas/Fort Worth is overbuilding.
The answer completely varies depending on the context–whether one is concerned with location, product type, and/or timing. I don’t think we can say we are overbuilding across the board, although that may be true with certain building types in certain locations. Today, there are 61 million square feet truly under construction across Dallas/Fort Worth. However, the 61 million square feet must be broken up into smaller, more specific data sets to provide more useful information. If this overall statistic of 61 million square feet were the only data point used to determine whether or not to go forward with a new development, the answer would almost certainly be “no.”
However, by digging into the 61 million square feet and understanding where and when each project will deliver, the answer may change. It’s important to understand what specifically is under construction today and the timing of delivery. While some product will deliver tomorrow, other projects under construction won’t deliver until the end of 2023. There’s very little available space on the ground today, and tenant demand remains strong in most (but not all) sizes. All of these data points are crucial considerations with any real estate investment. That said, the second half of 2022 will tell us a lot about supply and demand with the most recent development pipeline. I expect to have a more complete understanding of the overbuilding question by the end of the year. So if you want to talk about overbuilding, let’s really dig into the data and get specific.
This is today’s question. Tomorrow’s questions will be different. Markets are constantly evolving, just like anything else. So, as this next season approaches, remain committed to what your clients need and keep to the fundamentals: remain tied to the market, stay informed, keep your eyes and ears open, build relationships, and leverage your professional knowledge and data to help clients meet their goals.
Matt Dornak is Stream Realty Partner’s Managing Director of Industrial Leasing for Dallas-Fort Worth.