By: Cannon Green, Scott Sowanick and Bates Arnot of Stream’s Industrial Development Services Team
We think about development differently than our counterparts. Stream’s Industrial Development Services group has always taken a unique approach in identifying client needs and opportunities. And even in the current global environment, that hasn’t changed. With an eye on the future, our Industrial Development Services business is even more focused on what could be versus what is, just as dedicated to creating continuity and certainty for our clients during these uncertain times.
Moving Forward During Uncertain Times
The federal and state government shelter-in-place executive orders, instituted in an effort to flatten the COVID-19 curve, have inevitably impacted the U.S. economy; of this, we are certain. U.S. jobless claims since March have increased at a remarkable 165 percent week-over-week rate, starting with the March 7th figure of 211,000 claims. Six of the eight weeks March through April produced the six highest weekly jobless claims on record, dating back to 1967 (5.05 million claims per week on average). We can all agree that this data is staggering and that the near future may continue to be challenging. However, when it comes to investing in industrial real estate, we do not believe that near term economic uncertainty is an indicator for long-term viability, or that inactivity while waiting for market improvement is a strategy for success.
With this macroeconomic backdrop in place, it’s even more important to maintain open communications with a trusted real estate operator. Stream’s Industrial Development Services team has taken proactive measures to support clients in facing whatever comes next, together.
Stream’s nimble platform allows our advisors to pivot quickly to serve client needs. In addition to general day-to-day support, we are monitoring the market and assessing short- and long-term investments to determine how to best to proceed on our clients’ behalf. To this end, over the past 60 days we’ve continued to work to meet the needs of our clients as each of their individual scenarios evolve.
- Closed on 30 acres in DFW
- Re-sequenced the delivery of a multi-building development to accommodate a user sale
- Continued construction and leasing progress on multiple projects while postponing two investment sales
- Made an offer (which we countered ourselves) to compete with a user for a site in Denver
- Created a custom model to underwrite a large multi-phase development
- Successfully completed due diligence on a new GLA land site while operating 100% remotely in accordance with California and Texas shelter-in-place orders
- Entertained an offer to sell entitled land in GLA
- Progressed PSA negotiations on a 40-acre land acquisition in GLA
- Became very familiar with Microsoft Teams, video-conferencing and other ways to connect with our team and clients in this time of social distancing
The Road Ahead
There is no universal strategy for how the industry can move forward in the current environment. However, we firmly believe that the evolution of the industrial product type will be even more robust once the pandemic has subsided. The adoption of ecommerce practices by U.S. and global consumers is likely to become the norm. As domestic companies analyze the cost-benefit of relocating manufacturing to on/near-shore sites, we expect to see a definitive impact on the future of the supply chain process.
Returning to a semblance of normalcy may take longer than expected as cities and states grapple with reopening. Commercial real estate investors and their tenants will find themselves at a crossroads on how to maintain their property investments. Exploring new deals and future investments are possible, provided that key stakeholders are working cooperatively and effectively communicating expectations.
Independent of the economy, a large portion of success in industrial development comes down to site selection, land price, product type and timing. The criticality of these factors has never been more important than now as options for opportunistic investing arise. Although we can’t anticipate the future of the markets, we can lean into our expertise to better understand how these complex and uncertain market conditions, and the secular fundamentals, will drive the industrial sector.
There Will Be an Upside
An unintended societal benefit from the shelter-in-place orders has been the opportunity to analyze aspects of our lives and the realization that some elements we perceived necessities are actually luxuries. We can likely all agree that industrial is one of the least luxurious product types within the commercial real estate landscape. As industrial specialists, we have always known how critical industrial real estate is to commerce operations in the U.S. and globally. We’re confident that COVID-19 will shed a more pronounced light on the necessity of the industrial commercial real estate as an essential investment.
In the interim, we will continue to maintain our focus on envisioning a different future for industrial developments, through any near-term macroeconomic headwinds and as a result of our thoughtful approach, critical thinking and grit to create certainty for our clients.