This unwavering commitment to people and client-centered approach to real estate has not only set an exemplary standard throughout the Northern Virginia market, but has earned them the 2024 CoStar Career Achievement Award. It’s a testament to the power of meaningful connections, where building trust and genuine care are just as important as closing deals.   

Getting started in CRE 

As the team reflects on their careers, with 80+ combined years of experience, they can’t help but fondly recall their early days in CRE, each taking a unique path. For Deringer, the passion for real estate started early on. 

“I distinctly remember hearing about CRE from several college friends who had recently graduated and moved to Washington, D.C.,” Deringer recalls. “I loved the idea of building a career in a thriving market and economy that was just starting to take off in Northern Virginia.  Working on complicated transactions in a competitive environment where hustle and hard work pay big dividends struck me as the perfect blend of skill sets needed to be successful and add value.” With so much happening in D.C. at the time, Deringer knew this was the path for him. “Everything in D.C. felt vibrant and full of potential, and I knew then that the many opportunities in CRE would enable me to be a part of it,” he continued. 

Cloud’s journey was a bit different. “I interviewed at CBRE, but they stated I needed sales experience before hiring me,” Cloud recalls. “So, I took a job in sales at the Yellow Pages, came back, and have been in CRE ever since.” 

For many, getting started in CRE can feel like a winding road, especially without the right support. Hassett describes the transition from a corporate management consulting role to commercial real estate as a substantial shift.  

“In consulting, there was a clear path with regular feedback and set promotion schedules,” Hassett explains. “But getting started in commercial real estate can feel like the Wild West—with no defined roadmap to follow.”  

One of the biggest challenges Hassett faced was breaking into the market with limited knowledge. With just an email address, phone number, no existing client base, and a draw-model system to earn from, it was easy to feel lost. That is until Hassett met Deringer and Cloud at Transwestern, who took him under their wing. 

“Having strong mentors, as I did, and making the most of those opportunities is what has made my career incredibly rewarding,” says Hassett. 

The trio has now worked together for 14 years, making the move to Stream in March. 

“The decision to come to Stream was simple,” shares Cloud. “The energy, excitement, and people-first culture were the biggest draw. Stream wasn’t just interested in growing the company, but in delivering solid results for its clients. As a team that has always placed client needs above all else, that resonated with us.”

Delivering Exceptional Results  

Even amid market challenges, the team at Stream NoVA has proven their resilience and adaptability. As Deringer puts it, “We’ve been around long enough to know that you don’t get too excited about the highs, and you don’t get too worried about the lows. Instead, focus your energy on understanding what works and what doesn’t to ensure you’re driving client value.”  

And drive value they have. 

This year alone, the team has delivered on two impressive projects: the first, a prime infill site along Route 28 South. “We competed for the business against our four biggest competitors with a very comprehensive pitch presentation (our first at Steam), which was a gratifying win for our team,” Deringer notes.  

28 South Distribution, a state-of-the-art industrial building, is set to deliver in mid-2025. Its central location, in Dulles south, and unique design, featuring retail elements and ample warehouse space, are expected to attract a premium tenant. “We envision a tenant who needs a small showroom and office with warehouse capacity and who appreciates the unique value in locating to this rare and high-quality space,” Deringer adds.

Another notable project involved Beanstalk, a pioneering vertical indoor farming company. The team successfully secured a new facility in Prince William County, specifically tailored to meet Beanstalk’s innovative agricultural practices. “Beanstalk is at the forefront of indoor agricultural technology, using soil and renewable energy to grow produce indoors,” Deringer explains. “The Governor’s visit and ceremony to celebrate their new location and growth highlighted the importance of this business and its contributions to the region and state.” 

Looking Ahead.

As the team reflects on their recent CoStar award, they can’t help but feel immense gratitude for their lucrative partnership and the clients they’ve had the privilege to serve. “This award isn’t just about us,” states Hassett. “It’s about the incredible clients we’ve supported and, in turn, the goals we’ve brought to fruition.” 

Sitting with the NoVA industrial team, it’s clear that they’re proud of their past, excited about the present, and optimistic about the future, viewing each opportunity as a chance to continue to perform.

Camaraderie, service excellence, and industrial expertise – it’s clear that when relationships come first, success follows suit.  

——-

Interested in building your career at Stream? Visit our Career Page, today!

The post Stream NoVA’s Industrial Team’s Winning Approach to Real Estate appeared first on Stream Realty Partners.

To maintain the competitiveness of U.S. ports and infrastructure, the U.S. Department of Transportation Maritime Administration (MARAD) has secured $450 million in annual federal funding for the Port Infrastructure Development Program (PIDP). This program focuses on modernizing the nation’s coastal and inland waterways, ensuring the U.S. can handle dynamic supply chain challenges so that cargo and raw goods can get where they need to be, no matter what.  

With industrial and logistics facilities needed to support increased shipping activity, commercial real estate (CRE) within these regions is seeing an uptick in demand.  

Case in point: the Port of Long Beach, Port of Virginia, and Port of Savannah.

Port of Long Beach: The Port of Choice 

The Port of Long Beach, one of the busiest container ports in the United States, is undergoing ambitious expansion projects to accommodate larger vessels and boost capacity. With more than $52 million invested in infrastructure upgrades, including constructing new terminals and deepening harbor channels, the Port of Long Beach is positioning itself as a premier gateway for international trade. As a result, there is a growing need for warehousing and distribution centers in the surrounding area to handle the influx of goods flowing through the port. 

“Port activity is a major driver of the Southern California industrial market,” says Jared Dienstag, Director of Research for Stream SoCal. “It is a key reason why so many companies maintain an industrial presence in the region.” 

Dienstag explains that in Los Angeles County, industrial rents are highest in the South Bay submarket due to its proximity to the Long Beach and Los Angeles ports. “Average annual asking rents in the South Bay submarket are $21.60 per square foot, compared to $19.92 for the entire Los Angeles market, highlighting the premium cost of being near the port,” he adds. 

With transportation and logistics being major challenges for industrial occupiers, proximity to the port is a major appeal. “The quicker products are loaded on and off at the port, the quicker they can reach their destination and eventually be sold to consumers,” says Dienstag. “The most recent grant for the Port of Long Beach will accelerate cargo flow, further benefiting companies throughout the area.” 

Dienstag notes that except for 2021 and 2022, when the impact of COVID-19 was most significant in supply chain logistics, 2024 could potentially set a TEU record at the Port of Long Beach based on year-to-date data from January to April. 

The Port of Virginia: America’s Most Modern Gateway 

Similarly, the Port of Virginia, encompassing facilities in Norfolk, Portsmouth, and Newport News, is undergoing a transformational expansion initiative to enhance its capacity and efficiency. With investments totaling $1.4 billion, the Port of Virginia is upgrading terminals, expanding rail and road networks, and deploying cutting-edge technology to streamline operations. This expansion is driving the need for industrial real estate in the region, with developers scrambling to meet the growing need for warehouse and distribution space near the port. 

“Port activity is a major driver of economic growth and opportunity in the region served by the Port of Virginia,” comments Charlie Smiroldo, Managing Director for Stream D.C. “The port’s strategic location on the East Coast makes it a crucial gateway for international trade, attracting businesses and investment to the surrounding areas.” 

As a vital link in the global supply chain, the Port of Virginia’s ongoing expansion initiatives enhance its capacity to handle increased cargo volumes, creating opportunities for businesses to capitalize on the growing need for logistics and distribution services. Smiroldo highlights that the improved infrastructure projects have made The Port of Virginia the only semi-automated port, allowing for two-way vessel traffic while also being the deepest along the East Coast. “This allows for additional TEUs and reduced turnaround time for trucks,” he explains. 

Consequently, industrial real estate markets near the Port of Virginia are experiencing heightened demand, driving up property values and spurring development activity. 

“Because land supply is constrained in areas surrounding the port, mainly due to wetlands and limited tolerance for re-zoning, many companies are branching into regions historically outside their search areas, yet still close enough to provide the port access they need,” says Smiroldo. “Areas along I-64 and I-95, in and around Richmond, have been the beneficiaries—it’s amazing to see what’s happening across the region directly related to port users.”

Smiroldo continues, “The Port has been an exceptional partner, too, often assisting developers with the jurisdictional process and connecting companies to warehouse and yard space. It’s rare and encouraging for future growth to find an organization that’s great to work and also a full advocate.” 

The Port of Savannah: The Single Largest and Fastest Growing Terminal in the U.S.

Strategically located along the Savannah River in Georgia, the Port of Savannah has become one of the fastest-growing and most vital ports in the U.S.  

Owned and operated by the Georgia Ports Authority (GPA), this bustling port is experiencing continued remarkable growth, as the GPA is committed to over $4.5B in investment centered around infrastructure improvements to both the Port of Savannah and intermodal connectivity. Announced in 4Q 2023, the Blue Ridge Connector project will be designed to serve as an inline connector between Gainesville and the Port of Savannah, facilitating the movement of rail traffic off the port into Northeast Georgia and beyond. 

“GPA’s commitment to innovation and sustainability continues to drive the Port of Savannah’s growth,” says Andrew Ashmore, Senior Associate for Stream Atlanta. “By investing heavily to streamline operations, reduce environmental impact, and improve overall efficiency, they are establishing themselves as the primary gateway to the Southeast.” 

This growth has bolstered the local economy and contributed significantly to the broader economic landscape, creating thousands of jobs and attracting substantial investment to the region. “In May 2024, the Port of Savannah handled 490,000 TEUs–a 22% increase from May 2023, with several months throughout 2022 reaching the low to mid-500,000 TEU range,” notes Ashmore.  

Looking to the future, Ashmore anticipates continued growth, especially as electric vehicle manufacturing expands throughout the Southeastern U.S. “These infrastructure advancements are expected to increase the Port of Savannah’s capacity from 7 million TEUs annually to more than 12 million within the next decade.” 

Opportunities abound

As the U.S. continues to invest in ports, infrastructure, and critical manufacturing, the resulting demand for industrial spaces, such as warehouses, distribution centers, and manufacturing facilities, is likely to lead to higher property values, new development projects, and increased economic activity. Strengthening the nation’s infrastructure is not only enhancing global trade capabilities but also creating numerous opportunities for growth and investment in the real estate market. CRE stands poised to reap significant rewards. 

—

Jared Dienstag is the Director of Research for Stream’s Southwest Region, overseeing office, industrial, and retail market research across Southern California. 

Charlie Smiroldo is the Managing Director for Stream’s Washington, D.C. office, responsible for tenant representation, investment sales, construction management, and acquisitions. He also leads Stream’s Industrial Development Services in the Mid-Atlantic region. 

Andrew Ashmore is a Senior Associate for Stream Atlanta, specializing in research and representation services for the industrial sector.  

The post Port Infrastructure Spending Provides for Future CRE Growth  appeared first on Stream Realty Partners.

The picturesque landscapes of Colorado have long been synonymous with breathtaking mountains and outdoor adventures. However, beneath the stunning natural beauty lies a burgeoning industrial transformation that is reshaping the state’s economic landscape.  

In recent years, Denver’s presence as a focal point for the aerospace and advanced manufacturing industries has grown exponentially, with companies seeking strategic spaces that foster sustained growth. Supply chain issues realized during the peak of COVID resulting in the progression of onshoring manufacturing companies, supplementing the billions of dollars in government grants to manufacturing, defense, and aerospace industries, have been significant catalysts in these sectors’ resurgence in Colorado. But this industrial renaissance isn’t confined to the traditional hubs of Boulder and Denver; instead, it’s permeating adjacent submarkets, marking a paradigm shift in the region’s industrial narrative. 

As renowned entities like Lockheed Martin, Ball Aerospace, and Sierra Space extend their reach and attract other aerospace manufacturers and suppliers, the prominence of these tenant profiles has shifted the market. For example, Denver’s East I-70 submarket, which has historically commanded a high volume of transactions from big-box distributors, has softened, particularly for bulk warehouses in speculative projects. Meanwhile, shallow bay rear-load buildings with heavy power in the Northwest and North I-25 submarkets, which have historically recorded lower transaction volume, are undergoing a notable resurgence and have commanded significant interest from users, particularly in the aerospace and manufacturing sectors. 

Rental Rates 

Against the backdrop of this industrial pivot, the intricate tapestry of rental dynamics is revealing intriguing shifts across various submarkets.  

The East I-70 corridor, which has traditionally attracted occupiers in need of expansive facilities, is experiencing a shift in preferences. There is a noticeable decrease in the demand for larger-sized spaces, indicating that large distributors and suppliers are taking a strategic pause to evaluate their options amidst the evolving economic conditions. The Southeast submarket highlights another concern: supply outpacing demand, causing rents to plateau. This introspective phase may be influenced by factors such as changing consumer behaviors, tenant profiles, market shifts, or a desire for more agile and adaptable spaces. 

Contrastingly, infill Northwest, North I-25, and Central submarkets present a dynamic scenario characterized by sustained rental rate increases, fueled mainly by increased development costs, scarcity of land, and occupier’s location preferences. The Northwest and Central submarkets face a scarcity of suitable spaces for growth due to limited land for expansion, creating a competitive landscape reflected in a sustained uptick in rental prices. In the North I-25 region, the development of new assets delivered with expensive speculative office space and increased power has created a dynamic that requires developers to raise rents to maintain their projected yields. These submarkets, therefore, stand as a testament to challenges posed by limited resources and the ever-present pressure of construction costs in the face of growing demand by a new wave of occupiers. 

In essence, the demand from aerospace and advanced manufacturing companies historically located along the I-36 corridor necessity for additional space, coupled with the scarcity of land to build additional product, has begun to push occupiers to the adjacent I-25 submarket and down into infill Central Submarket facilities. The relatively limited pocket of growth can, in part, be associated with the challenge of skilled labor retention and the desire to be near the large aerospace players in the market, therefore painting a picture of an industrial sector in flux, responding to various economic, logistical, and market forces

Meeting immediate and changing needs.  

Traditionally, the process of securing industrial space in Colorado involves intricate permitting procedures and lengthy construction timelines that present formidable obstacles for companies with immediate space needs. Recognizing the urgency dictated by the dynamic and fast-paced nature of this emerging subset of tenants in the market, developers are proactively implementing strategic measures to address the pressing space requirements of tenants. 

The approach to building speculative offices seamlessly integrated alongside industrial building deliveries serves a dual purpose, streamlining the leasing process while accommodating the compressed timelines of aerospace and manufacturing tenants seeking rapid occupancy due to the speed of growth. By incorporating speculative offices directly into industrial constructions, developers not only mitigate lead times but also foster a more agile and responsive leasing environment, ensuring an efficient experience for businesses in need of urgent solutions. 

Furthermore, developers are actively working to deliver industrial buildings equipped with enhanced power capabilities that exceed the capacities of traditional spaces, primarily required by aerospace and manufacturing groups. This strategic foresight acknowledges the reality that the timeline for such upgrades post-occupancy could extend upwards of 18 months. By providing buildings with augmented power infrastructure, developers are offering tenants the flexibility and scalability required to meet evolving operational demands, ensuring that the industrial spaces remain adaptable to the dynamic needs of businesses over an extended duration.  

Shaping a Dynamic Hub 

The industrial landscape in Colorado is not merely a passive observer of change; it is actively shaping its identity as a dynamic and thriving aerospace and manufacturing hub. This transformation is evident through strategic initiatives such as constructing speculative offices and delivering heightened power; both underscore the market’s adaptability and responsiveness to the ever-evolving dynamics of industry growth. 

As Colorado continues to shape its identity in the industrial realm, the significance of strategic planning and innovative solutions cannot be overstated. Developers’ creativity in solving shortages in water and power will influence their ability to succeed and cater to a resurging aerospace industry. In summary, Navigating the complexities of this evolving landscape requires a commitment to pushing boundaries, embracing change, and envisioning an industrial future beyond conventional expectations. The success of this evolution will hinge on the industry’s ability to not just respond but actively shape the trajectory of Colorado’s industrial narrative. 

The post Denver’s Industrial Evolution: A Growing Hub for Aerospace and Manufacturing appeared first on Stream Realty Partners.

Negative headlines have dominated newsfeeds, with stories spanning a potential recession, inflation, pending loan maturations, bank failures, and shifting consumer behaviors, doing little to ease growing concerns about the U.S. economy. The commercial real estate (CRE) industry has certainly had its fair share of coverage concerning each of these topics, with many wondering what the future of office and industrial sectors will be given the vast challenges ahead.  

While the difficulties afoot are bound to create hesitancies concerning the CRE industry and the economy at large, the boots-on-the-ground experience here within Denver’s CRE market hasn’t been the “doom and gloom” scenario often cited as the predominant news story, particularly as it relates to the industrial sector. In fact, what we’re seeing with industrial product in Denver has been quite the opposite–a market that is experiencing positive growth, and as we all know, positive stories aren’t often what serves as the best clickbait.  

Like many other markets across the country, Denver is seeing healthy absorption and steady demand. A typical year for Denver’s industrial market consists of an absorption rate of four million to six million square feet, with the exception of 2021 when Denver experienced record-breaking absorption at 10 million square feet. With such “negativity” being reported as it relates to all CRE product types, many would expect absorption within Denver to have dropped well below its baseline of four million square feet—but it hasn’t.  

Currently, absorption in Denver is nearly 3.5 million square feet YTD through Q2, on pace to remain within historical averages. Most of the activity has been occurring in spaces less than 150,000 square feet. Many of these spaces are within front park, rear-load, and mini-cross dock buildings, which remain popular with companies that are both established and seeking to expand within Denver, as well as those that are entirely new to the Denver area. 

While the second quarter of 2023 finished with 2,314,184 square feet of positive absorption, versus 2,753,727 square feet during the second quarter of 2022 (a 16% decline), the second quarter of 2023 increased 108%, when compared to absorption in Q1. This is especially true within the I-76 corridor, with Victrola signing for 103,031 square feet, Western Windows for 33,599 square feet, and Boise Cascades for 126,280 square feet.   

Additional deals that have signed under 150,000 square feet across Denver’s North, Northwest, East, Central, and Southeast submarkets include Ferguson, Amann, Eaton, Umoja, Honeywell, Cerapedics, Office Elements, Living Spaces, Lanter, Trautman and Shreve, Xpress, Laird Plastics, RMFX/Houger Express, LLC, Kiss Nutraceuticals, Sunrun, Frito Lay, Simpson Strong Tie, Charter, and Boom.  

One deal of note was signed for 330,536 square feet for Symbia at 17190 E 85th Ave Nexus at DIA.  

Though there’s no question that activity has remained strong, there are some changes within the CRE marketplace, all of which aren’t that unique to Denver.  

For example, just two years ago, Denver’s industrial market was driven mainly by larger deals, with significant build-to-suit industrial assets in greenfield locations experiencing the most activity. While these deals certainly continue to transact throughout the Denver region (and across markets throughout the country), many occupiers are now searching for a location (whether within a new construction or infill building) that has the lights on, so to speak, with speculative office suites, certificates of occupancy, and all the elements needed for rapid occupancy entirely in place.  

This flight towards a “ready-to-go” product isn’t all that surprising.  

With the cost of capital high and interest rates expected to continue to rise through the end of 2023, companies are looking for any and every way to reduce their overhead costs and remain efficient. The opportunity to surpass the build-out and permitting process provides businesses with the chance to save a substantial amount of time and money, serving as a draw in today’s economy. Additionally, these buildings enable occupiers to be fully operational almost immediately after signing their lease, ensuring that there is only a minimal delay in their overall production.  

There’s no doubt that there are still more questions than answers when it comes to the CRE industry and the U.S. economy at large; however, the negative headlines, though the most intriguing, aren’t always conveying the most accurate information. Perhaps Denver, being the Mile-High City, can serve as a beacon to showcase that things within CRE aren’t necessarily as bad as the negative headlines make them seem.  

The post Mile-High Industrial Continues to Shine Amid Negative CRE Headlines appeared first on Stream Realty Partners.

Who’s in the driver’s seat? 

Currently, SoCal’s Inland Empire (comprised of over 680M SF of industrial product) is seeing fewer deals occurring in the 50,000 to 200,000 SF size range due to an abundance of supply. Owners of big-box buildings (500,000+ SF) may find themselves a bit more insulated, but still have a supply issue, especially in the sublease space. Rental rates haven’t dropped off a cliff yet, holding steady at $1.43 PSF as of Q1 2023. But with the ongoing oversupply of industrial facilities not slowing down, rates will most likely decrease in the foreseeable future. On the other hand, private owners are more likely to offer concessions such as free rent and lower lease rates, allowing these buildings to move faster than institutionally owned facilities. 

With the western half of the Inland Empire filled to near capacity and a scarcity of development sites for large warehouses, the eastern submarket, in particular, seems to have heated up, currently leading the overall Inland Empire market in net absorption due to sizeable tenant move-ins. Recent significant lease signings include Brother International’s 348,375 SF transaction at Harley Knox Gateway in Perris and Cypress Medical Products’ 333,572 SF at Harvill Logistics Center, also in Perris. 

As we know from past experience, the potential to seize opportunities is often overlooked when challenges arise. But with the abundance of vacant product on the market in the Inland Empire—and many that are Class A buildings geared toward distribution/warehouse use—there is the possibility for adaptive re-use/repurposing, especially for those facilities that might be considered more antiquated. Outdoor storage yards are performing relatively well—and are in an even better position if situated on a property with excess land.  

Location…location…and regulation 

Location is everything…but so is savings. Companies still want to be as far west as possible (Ontario, for one), but we’re even seeing tenants going up to the High Desert, with the first few spec leases having just signed there, such as Iron Mountain’s 400,000 SF building and Amazon’s 1.5M SF building both in Victorville, for example. From a developer’s standpoint, it’s also easier to secure entitlements and approvals in the markets further west, and from a user perspective, venturing into submarkets like Apple Valley to avoid higher rental rates is becoming more the norm. Our team at Stream recently closed on 200 acres with a developer in the High Desert, and Fellowship Logistics just leased a 1M SF building from Exeter in Hesperia.  

In terms of development, there’s not much opportunity in the 30, 40, and 50-acre range, so it’s limited when it comes to what’s possible to build. A few sites are still left in the eastern part of the submarket (Perris, for example), but we’re finding site selection to be more challenging in the west. The oversupply is also causing developers to press pause on construction (even if the land is entitled).  

Another trend we’re continuing to see is more companies migrating to Mexico due to less stringent regulations. According to a recent NAIOP article, Mexico, in particular, has experienced significant industrial development growth in recent years, boasting 13 free trade agreements with privileged access to 50 countries, representing 60% of global GDP and more than 1.3 billion potential consumers. The most significant of these agreements is the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA and was implemented on July 1, 2020.  

So, what’s the verdict? 

The industrial sector is performing better than many assumed it would as we reach the halfway mark of 2023. Perhaps some of the negative forecasting can be attributed to those who spoke too soon back in early 2022 when many seemed to be suffering from amnesia when it came down to the oversupply conversation. We easily forget what happened at the start of the recession in ’08, when absorption rates were at historic levels, and then when Covid came into play, it also distorted everything. Tenants were pre-leasing during Covid, and some companies weren’t even responding to offers early on in construction. Now, businesses are leasing anything they can. Absorption rates are moving closer to availabilities, and absorption is getting back to more historic levels.  

In reality, the market is moving back to where we really should be, to pre-Covid levels. We were up 200% pre-Covid, and now we’re down 30-50%, but pricing’s still above pre-Covid. So, the truth is, we’re far from spiraling: people are still buying buildings and closing deals. 

Stefan Pastor and Brad Yates are both Senior Vice Presidents in Stream’s Southern California market, responsible for building the firm’s industrial brokerage platform in the Inland Empire region. With a combined 30+ years of experience in commercial real estate, they’re focused on sourcing and executing new acquisition opportunities, investment sales, leasing, and developments, along with recruiting and training team members. 

The post Light at the End of the Tunnel for Inland Empire’s Uber-Saturated Industrial Market? appeared first on 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.

Relationships First

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.

The post Staying Current In An Ever-Changing Industrial Market appeared first on Stream Realty Partners.

Of U.S. publicly traded oil companies, 44 out of 113 are located in Houston. But the City is about more than oil and gas. With global targets for fossil fuel reduction and a movement toward renewable energy sources, Houston’s high concentration of engineers and experienced energy professionals—plus a reported $3.7 billion in Cleantech Venture Capital Funding—means the region is well-positioned as an innovation hub to develop large scale renewable energy projects in solar and wind.

In terms of commercial real estate (CRE), we look at Houston with a broader view. The Houston industrial market is just over 716 million square feet, comprised of institutional and non-institutional quality (i.e., grade level crane-served/specialized manufacturing) facilities. The institutional side of the market reduces that tracked square footage nearly in half to 323 million square feet citywide.

Consumptive Demand and Accelerating Trends

Houston is often perceived as 100% energy-based. And while no doubt energy plays a major role, there are many more segments of the Houston economy that are not directly tied to energy.

The Houston industrial market is mostly influenced by consumptive demand—meaning anything you need to live, work, eat or play. All the things that go into building a house, buying groceries, and items you order online. These consumables are the drivers of Houston’s industrial market. Houston’s population is now more than 7 million people, the 4th largest MSA in the country behind Chicago, driving demand for goods and it is this derived demand that impacts the institutional side of Houston’s industrial market.

COVID-19 accelerated existing trends toward national growth in demand for industrial assets. Companies have revamped supply chains, and many companies have added to their e-commerce functions. Real Estate Capital Alliance reported that “In retail e-commerce (of physical goods), yearly total revenue increased by $71.55B in 2020 and is projected to increase by another $131.74B by year-end 2025 (Statista). This exponential growth is a great indicator of what’s to come in terms of industrial space demand. Before 2020 yearly growth averaged only $37.09B per year. To put this into perspective, e-commerce retail revenue grew 120% in 2020 even as the Covid pandemic put the brakes on the overall economy.”

Online businesses and traditional brick-and-mortar retailers alike have to offer their customers a convenient e-commerce platform to retain loyalty and gain new business. Houston has seen a huge growth in new entrants to the market, driven mostly by companies modernizing their supply chains to enhance proximity to Houston’s massive population, achieve port diversification, and to maximize their e-commerce reach and capability. The growing demand for products sold online and consumer expectations for speedy delivery impacts suppliers, manufacturing, and of course demand for industrial assets.

With 7 million people locally, plus reach within a 5-hour truck drive to upward of 16 million people (excluding Dallas/Fort Worth) from a distribution perspective—Houston is perfectly positioned to meet the demand for this evolving and growing consumptive demand.

There are some larger industrial markets across the country; Inland Empire, Dallas, Chicago, Atlanta, and the Lehigh Valley in Pennsylvania, which are classified as tier 1-A distribution markets. Even pre-COVID, businesses were revamping their supply chains to capitalize on e-commerce and omnichannel opportunities. COVID meant that businesses needed to fast-track those efforts. Stay-at-home orders and restrictions meant that people could not go anywhere—and many turned to online solutions for everything from food deliveries to workout equipment.

The 1-A markets were prioritized by businesses. Distributors made their bets and built out their distribution center networks in those markets first. Once those primary markets have dots on the map, the strategy expands to Tier 1-B markets like Houston to meet new demand and pressures being exerted in the new economy. As a result, Houston’s industrial product is experiencing higher tenant demand now than at any single point over the last 15 years.

High demand, coupled with shrinking supply and higher barriers to entry, such as the new floodplain restrictions, mean there are fewer viable development sites. Bisnow reported recently that competition for well-situated land along transportation corridors has become so fierce in Houston that industrial developers are paying 30% to 50% more for land than a few years ago. These factors, coupled with increasing commodity prices (steel, concrete, and roofing materials), are driving up construction costs. Costs that will eventually pass to end-users as demand continues to outstrip supply and drives market costs. Rent growth in the short to medium term is anticipated, due to these dynamics.

Developers are considering less obvious, more pioneering areas or more remote sites, which can impact the access to available labor. If a developer plans to build 1 million square feet, there are not many viable “plug-and-play” sites to choose from anymore. Identifying sites and assessing them for feasibility takes a lot of analysis and creativity in today’s environment. Developers new to the market who plan to build, are challenged because of those nuances.

It is an interesting phenomenon when 12 months ago Houston was perceived as an overbuilt market. Today and through the end of this year, that switch is flipped. As new deliveries to the market remain very measured (at least for the next 18 months), supply has become even more constrained and pre-leasing of new industrial developments is occurring in the most sought after submarkets. Currently, there are so few new construction options for tenants, that Houston is a fully landlord-driven market.

What’s Next for Houston?

As the pandemic accelerated the consumer trend for online shopping described by Bisnow as “on a scale never before seen in the U.S.”, demand for institutional-grade warehouses and distribution space has skyrocketed. Houston’s location as a transportation hub makes it an ideal to fill consumptive demand in the 1-B Tier space for distribution facilities. Transportation costs and many elements of the supply chain are linked to the energy market, but there is no doubt that the demand for consumable goods (excluding oil and gas) is the catalyst for Houston’s distribution revolution.

The overall outlook across most submarkets is that Houston will become further supply-constrained for new institutional-grade industrial product, independent of the oil and gas markets. As pre-pandemic supply is absorbed, and vacancy rates continue to fall, Houston’s industrial market will become even more appealing for investors, attracting developers to compete and pay higher land prices, increasing rents in the process.

Stream Meets the Demand for Industrial Space

After delivering phase one of the speculative industrial development, Empire West, in April 2021, just four months later the asset is 100% occupied. Empire West phase two recently broke ground in September 2021 to provide a further 2.3 million square feet across six new buildings.

While the institutional quality side of Houston’s industrial market is not correlated to the price of oil, it is tied to the consumer, and that consumptive economic machine is rolling fast, and we believe will continue to do so. Through the end of Q3 2021, the appetite for high-quality distribution space continues to improve the statistics for the Houston market. With record-setting positive net absorption, and overall vacancy decreasing quarter-over-quarter throughout 2021, Houston will remain a landlord market for the foreseeable future. However, developers are taking note of these improving statistics and will inevitably find a way to get buildings into production. While more challenging than in the past, typically time and money cure most development challenges in our market. That said, we see a dramatically undersupplied market over the next 18-24 months that will lead to meaningful rent growth and further tightening in the market. The big question is how long the run will last, a question nobody knows. We look to the Tier 1-A markets that are ahead of Houston to help predict our future. We have not seen any worrisome statistics to indicate we will see a slowdown in tenant demand in Houston any time soon. We believe it is the opposite, where Houston is early in the cycle for growth.  

Houston has seen massive growth in life sciences, hosting some 1,760 life science companies, the city is also home to the largest medical center in the world Texas Medical Centre. Houston ranks third among U.S. metro areas in Fortune 500 headquarters and has a good business climate for smaller businesses, local tech startups reportedly raised over $820 million in Venture Capital in ’20. When you think of Houston, think oil and gas, but also think life sciences, aerospace, digital technology, and innovation, think education, and remember that Houston has the largest export market in the U.S and that Port Houston is the largest container port on the Gulf Coast—so, as consumptive demand continues to rise, think of industrial assets and distribution.

Justin Robinson is a Managing Director & Partner in Stream’s Houston office. Justin oversees transaction services in Houston, with a portfolio of 43M SF. He has executed real estate transactions over $1 billion and has procured and executed the development of 30 Class A industrial assets totaling over 8.5 million square feet.

The post Hot Markets: Houston’s Distribution Revolution appeared first on Stream Realty Partners.

Prior to Friday the 13th, the Denver industrial market had never been more active. Tenants were absorbing space at a significant clip, developers were delivering product at levels never seen before, and institutional capital was aggressively purchasing new, stabilized construction at cap rates in the low 4 percent range.

A Trend On The Rise

A prominent trend – one that had never occurred before 2019 – was also emerging. Institutional capital was starting to complete transactions on both forward-commit purchases and new project acquisitions that featured substantial vacancies. With all this activity, it was becoming evident that institutional buyers saw an opportunity to acquire buildings from developers with closing dates set at the project’s delivery.

So, what was fueling this demand? Development projects across all Metro Denver municipalities had become exceedingly time consuming with entitlement procedures that were difficult to navigate. Institutional capital typically cannot maneuver this lengthy process due to capacity and the considerable opportunity costs to allocate the necessary equity in a development project for 18 to 24 months.

Instead, acquiring projects with vacancies at enough of a discount to stabilized pricing provided investors with significant value-add in the lease-up period while forgoing a burdensome and costly process. In turn, developers were happy to entertain these transactions, shedding their own lease-up risk and moving onto the next project. This trend took hold in 2019 and continued into early 2020 until it was halted by COVID-19 when the economy froze. At that point, there was no way to accurately predict market lease rates or leasing absorption.

Institutional Capital Remains Interested

As we fast forward to October, the Metro Denver industrial market has come back to life. Institutional buyers now feel comfortable predicting future market lease rates and absorption curves, and the path is forward sales once again. These forward transactions accounted for 55 percent of the buildings larger than 50,000 square feet sold in the third quarter.

Looking beyond 2020, we believe institutional capital will remain very interested in the Denver story. The decentralization of supply chains from traditional gateway markets – in response to consumer demands for faster delivery of goods – will increase occupier demand and further drive new development. Recent investment in key infrastructure improvements, such as the expansion of I-70, as well as a rapidly growing population also create a compelling opportunity for stabilized buyers to continue to invest in the Denver region.

While COVID-19 continues to negatively impact many other product types, the re-emergence of strong demand from industrial tenants will result in additional forward-commit or high vacancy sale transactions from developers to institutional buyers for the foreseeable future.

This article first appeared in Western Real Estate Business’ October issue. 

The post Institutional Money Finds A Home In Denver’s Industrial Market appeared first on Stream Realty Partners.

Lumbreras said, “Our team has always felt like e-commerce, particularly for Houston, is still in its infancy, especially when you look at our size population compared to similar-sized metros. Most of these larger e-commerce users only have a fraction of the footprint as they do in some of those other markets.”

Despite any challenges and possible pent-up demand for inquiries and tours, Stream has continued to execute deals. Since the stay-at-home orders came into effect in mid-March, Stream has signed 58 leases amounting to 2.2 million square feet, of which 47 percent were either new deals or expansions.

Click here to read more from Bisnow’s recap, titled “Houston’s E-Commerce Industrial Demand is Still in its Infancy.”

Source: Bisnow

The post Stream Industrial Expert Believes E-Commerce Industrial Demand in Houston is Still in its Infancy appeared first on Stream Realty Partners.

This article first appeared in D Magazine’s Commercial Real Estate section.

Industrial is one of the most substantial commercial assets in real estate. Amid rising concerns of an economic downturn, there is much speculation about how the supply chain will be affected in the short and long term. Ryan Boozer, Managing Director and Partner, and Matt Dornak, Managing Director, Industrial Services at Stream Realty Partners, discuss the future of the supply chain and its effect on retail, manufacturing, and distribution.

What is the future of the supply chain?

Ryan Boozer (RB): Everyone is talking about the future of the supply chain and wondering what it means for the industrial sector. We are only three months into observing how the pandemic could affect the supply chain, and there is just not enough data out there to make sense of the facts and accurately predict what the future holds.

Matt Dornak (MD): I agree; the future of the supply chain is on everyone’s mind. Although we are optimistic about how quickly we can make a recovery, rebounding from COVID-19 is going to take some time. We don’t have a sense of timing on how long this period will last, however are beginning to see some bright spots and improvement in overall tenant activity. Whether these bright spots are reflective of market fundamentals or a function of pent-up demand remains unknown. The next 90 days are crucial and likely to reveal what could happen next.

What segments of the supply chain will feel the most impact?

RB: The majority of industrial tenants, deemed non-essential, are more or less in a holding pattern on their 2020 projections. On the other hand, food, namely grocery and essential goods, will experience the most significant shift. Compared to the last 15 years, people continue shop differently—online grocers attributed to a sales growth of $6.6 billion in May. And we’re already seeing how grocers and essential goods are handling storage quantity count with the increase in online orders. And we’re also seeing how grocers and essential goods are handling storage quantity count with the increase in online orders. Models like ordering groceries from your car, in the drive-through, picking them out yourself and then collecting them in the same trip may not be outside of the box in certain areas of the country.

Also, home improvement brands like Lowe’s and Home Depot haven’t seen a slowdown—both retailers have seen a rise in sales. The natural complement to either segment is in the bulk space—distribution and manufacturing.

MD: I agree, distribution is what I’m betting on. Even the most sophisticated logistics supplier in the world is shifting to keep-up with changes occurring to the supply chain. And, international shipping companies like UPS and FedEx feel the strain as well, so much so that they are adding delivery surcharges to offset the rising costs. 

What about the supply management of non-essential goods?

MD: I don’t think we have all the answers to how tenants will adjust to where they keep products, how much product they’ll have in stock, and where it will be stored. However, we should see more companies overstock product in the short term to better cope with and avoid any potential strain on the supply chain should the pandemic continue into late 2020 or 2021.

RB: I honestly don’t think anybody knows the answer to that right now. We’re all still trying to determine those answers, but I do believe business owners and executives are determining how to operate lean, and how to manage cash flows during unforeseen disruptions.

How do you envision factoring in last-mile facilities?

MD: The acceleration of more prominent companies as they shift toward eCommerce will likely lead to more last-mile facilities. You’re typically going to see your larger distribution facilities on the outskirts of a city. As residents continue to stay home, tenants in those markets are likely to establish additional warehouse distribution sites to deliver directly to the customer.

RB: Tenants can go on, without the need to pay for high-end retail space to display thousands of SKUs in limited quantities. Instead, we’re innovating on these last-mile centers—smaller distribution centers closer to the consumer base. 

What do you see having the most significant impact on the future of the supply chain? 

RB: If this is the conversation about what’s going to happen in the future, I don’t see how industrial does not stay the strongest asset class. Unless we have significantly expanded long-term economic downturns, I see industrial remaining very strong. Large distribution centers will continue to seek land that is more cost-effective, where transportation is efficient. It’s a cost-saving calculation of delivery incoming and outgoing. Industrial is necessary.

MD: We’re going to see a crazy shift toward ‘industretail’—a morph of the two sectors, with retail and industrial working together. For example, the concept of shortening the supply chain is not new; FreshDirect, an East Coast grocer, was a pioneer in the space. When you consider Walmart pilot tests of robotic vehicles to deliver inventory between warehouses, the expansion of people driving their cars into facilities to pick up groceries isn’t that far-fetched.

RB: From a retail and industrial perspective, the two have been crossing paths more in the last ten years. That’s going to accelerate in the years to come because of how goods are purchased. In the previous 60 days especially, there’s been quite a monetary investment going into data intelligence because of industrial’s challenge in the race toward efficiency and to create the largest margins, whatever and wherever they are.  We know there are various supply chain providers devoting significant time and money toward solving these issues for the future, as the race for efficiency and profitability continues.    

Right now, while there is no definitive answer on the future of the supply chain—though we believe the events around COVID-19 will accelerate its evolution much more quickly than anticipated.

Ryan Boozer is a Managing Director and Partner, leading Stream’s Industrial division in Dallas, Texas.

Matt Dornak is a Managing Director for Stream’s Dallas industrial division and is responsible for leading the strategic direction of the Dallas Industrial leasing team.

The post The Future of the Supply Chain appeared first on Stream Realty Partners.