Top Takeaways: NAIOP I.CON WEST 2024 Industrial Conference
This article was originally written and distributed by NAIOP.
A record-setting crowd of over 1,200 of commercial real estate’s top industrial owners, developers, investors and more gathered at I.CON West for high-level insights, networking and more.
Credit: NAIOP
1. Industrial real estate is rebalancing from its boom-and-bust years.
Pandemic-related demands and accelerated e-commerce growth created a surge in industrial real estate in 2021 and 2022, and the strong supply response that began in 2022 will continue to unfold through 2024, said I.CON West keynote speaker Christine Cooper, Ph.D., managing director and chief U.S. economist with CoStar Group. With rising interest rates putting a damper on demand in 2023, vacancies began to move higher and will continue to rise this year.
2. To stay competitive, supply chain experts must invest in efficiencies in both the external part of the chain (ex. port operations) as well as in transportation (ex. robotics).
“Transportation and inventory account for 60-70% of supply chain costs,” said J.C. Renshaw, head of supply chain consulting North America for Savills. Drones can deliver within a warehouse, but will we see them swarming our neighborhoods? Not in the near future, but the answer to the supply chain conundrum is in the analytics that will help leaders maximize their flexibility, resiliency and efficiency.
3. U.S.-Mexico trade is now outpacing U.S.-China trade by more than 40%.
“During the first half of 2023, $461 billion of goods passed through the U.S.-Mexico border, which is 44% higher than the value of goods between U.S. and China,” said Christy Gahr, director of capital markets, North America, Realterm. More than 150 foreign companies said in 2023 that they will open a new operation or expand into Mexico. These sectors include automotive, energy, manufacturing and IT.
4. Now is the best time to capitalize on grants and incentives for California’s phased transition to all zero-emission vehicles.
“I think this year is going to be a major inflection point,” said Victor Alia, senior development manager at Dedeaux Properties. “Starting in 2024, no new trucks can be sold [in California] that are not EV. We think the need for charging is going to be absolutely crucial, so if you can get ahead of that now, you are in good shape.”
5. Industrial tenants are expanding beyond California into other regions of the Southwest; it’s a complementary strategy rather than a California exodus.
“All of the markets in the Southwest are becoming more interconnected and interdependent than they were previously,” said Megan Creecy-Herman, president, U.S. West Region, Prologis. “In Southern California, there are 10 markets within 500 miles with over 25 million consumers who spend, on average, 10% more than typical U.S. consumers.”
6. ESG regulations and reporting requirements can lead to market differentiation, improved communication with tenants, and interest from global investors.
Breana Wheeler, director of operations at US BREEAM USA, said energy compliance may seem onerous but it can create opportunities. Reporting requirements can be used as a new way of working with tenants, for example. “Addressing energy consumption can show them how they can get a little bit better at controlling their costs,” she said. “They can better understand how they can improve their operations.”
7. Health and wellness in industrial buildings covers a wide range of considerations: individuals’ physical, mental, emotional health, and more.
Businesses can thrive by creating great places for people, said Scott Murdoch, AIA, partner at KSS Architects. “People need services, access to food, daycare, healthcare, so thinking about how you design a new campus out in a remote region will be distinctly different than one in a suburban context where those services exist.”
8. By paying early attention to all aspects of due diligence, projects can be completed on time and under budget – with no surprises.
Jim Camp, senior managing director, Rockefeller Group, emphasized the importance of picking the right site early. More than any other mistake, this single decision can derail a project right away… almost invoking the fail-fast mentality that breaks hearts as it saves money.
Panel speakers: Grant Waldron, Director, Sustainability Strategy at GAIA; Kristin Brown, Director, Sustainability at Rexford Industrial; Nichola Ilagan, Co-Founder and Managing Partner at DIV Industrial; Erin Thrash, VIP Design and Architecture at Rexford Industrial; Josh Cox, VP, Development at Hillwood – A Perot Company
9. Some ESG changes in industrial buildings can have low costs but high impacts, while design adjustments can save money during development.
While some people think sustainable design is more expensive, it can save money in the development process, said Nicholas Ilagan, co-founder and managing partner, DIV Industrial. “If you’re not part of the USGBC LEED Volume program, you’re leaving a ton of money on the table,” he said. “It has been by far one of the smartest decisions we’ve made.”
10. Power is a major consideration for industrial tenants in Southern California.
Bridge Industrial used to provide 2,000 amps as the standard but now provides 4,000 amps as the new standard in response to tenant needs. As the state works toward a 2035 goal of having 100% of new cars and light trucks sold in California be zero-emission vehicles, industrial sites are considering the current usage and future expansion of EV charging stations.
11. AI works from a combination of data analytics and machine learning; correct data is the very first and most important step in using AI.
It’s a big leap from utilizing no AI at all to jumping in, but correct data is the very, very first and most important step, and rigor ensures correct data. The foundation must be robust for the data “building” to stand up… just like a skyscraper. Rigor means insisting on consistency to the point of even paying employees for having clean data sets.
12. Industrial outdoor storage is a functional piece of the supply chain.
If a manufacturer or third-party logistics company doesn’t have the yard capacity it needs to support the distribution network, it can’t grow. Container storage is a critical piece of goods movement. When working with economic developers, ask them to keep the bigger picture in mind and remember that IOS is a key part of making supply chains successful.
Credit: NAIOP
