Future Industrial Trends from the Practitioners Perspective

Transcription

1 Future Industrial Trends from the Practitioners Perspective Moderator: Geoff Kasselman, SIOR, LEED AP, Newmark Grubb Knight Frank Speakers: Jim Clewlow, Chief Investment Officer, CenterPoint Properties Diane Gray, President & CEO, Centreport Canada 1

2 Geoff Kasselman Executive Managing Director, National Industrial Practice Leader, Newmark Grubb Knight Frank 2017 SIOR Global President Founder & CEO, Op2mize Energy 30+ years CRE experience 1,000+ deals worth in excess of $1B Speaker, author, award-winner Tech mentor & board member / advisor Global research: Smart buildings & cities Thought leadership: innovation & sustainability w/roi dynamics 2 2

3 Jim Clewlow CIO 3

4 James N. Clewlow Chief Investment Officer, CenterPoint Properties CIO since 2005 Joined CenterPoint in 1997 Overseen $10B Acquisitions and Dispositions CenterPoint Overview 60 MSF / 8 th Largest U.S. Industrial Investor/Developer Owned by CalPERS Focus on major U.S. Ports and Intermodal Markets 4

5 State of the Industrial Union It s now all about the fundamentals Cap rate arbitrage is over Leasing fundamentals extraordinary User demand high Supply constrained in most markets Capital abundant, seeking low volatility, inflation-protected yield Resistant to disruptors 5

6 U.S. Industrial Investment Market Remains Strong Industrial Property Values and Cap Rates Source: Green Street Advisors November

7 Institutional Investment Never Stronger $11 $10 $9 $8 $7 $6 $5 $5 $4 $3 $2 $1 $0 Sales Volume ($B) Sales Volume (Millions SF) Total Sales Volume ($) LOG/LIM 50K-250K SF Sales Volume ($) SF Traded Source: CoStar Portfolio Strategy *Four-quarter rolling average. As of 16Q3 7

8 Supply is Constrained Source: CBRE, Reis, U.S. Census Bureau, and Green Street Advisors, LLC 8

9 U.S. Supply Growing Slower 9

10 Only 6 Markets with Under Construction Headwinds Metro Vacancy UC Committed UC Available UC Available As % Of Inventory Las Vegas 7.7% % Lehigh Valley 6.5% % Inland Empire 5.5% % Edison 4.4% % Dallas - FW 7.6% % Harrisburg 7.0% % Nashville 5.3% % Palm Beach 8.0% % Saint Louis 9.7% % Baltimore 9.7% % Kansas City 9.1% % Atlanta 9.4% % Portland OR 4.8% % Cincinnati 7.1% % Miami 4.8% % Reno 13.0% % Seattle 4.6% % Chicago 8.4% % Austin 4.1% % Salt Lake City 8.5% % Source: CoStar Portfolio Strategy As of 16Q4 10

11 U.S. Industrial Vacancy Low 11

12 REIT Same-Store Growth Strong 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% DCT Industrial Trust Duke Realty Corp EastGroup Properties First Industrial Realty Liberty Property Trust Prologis PS Business Parks -2.00% -4.00%

13 Net Absorption Unabated 13

14 E-commerce Demand Growing Rapidly Source: Green Street Advisors, January

15 U.S. Industrial Market Rental Growth Increasing 15

16 U.S. Port Activity Healthy Import TEU s- 12 months ending December Source: Data Compiled from Individual Port Statistics Rolling 12 month through 11/30/16 and 11/30/15 16

17 Spreads UST Cap Rates Wide Overall Cap Rates to 10-Yr Treasury Yield 17

18 Yield Curve Flat RATES M 2Y 5Y 7Y 10Y 20Y 30Y MATURITY 18

19 U.S. Wage Growth Paltry 6 Job Openings (Ms) ATL Fed Wage Tracker 6% 5 5% 4 4% 3 3% 2 2% % Job Openings ATL Fed Wage Tracker (Median) Sources: Bureau of Labor Statistics; Federal Reserve Bank of Atlanta; CoStar Portfolio Strategy As of Jan

20 Labor Per Unit of Output Diminishing 120 Industrial Production Index (U.S.) Manufacturing Employment (U.S., Millions) Industrial Production Index Manufacturing Employment Sources: BLS; Federal Reserve; CoStar Portfolio Strategy As of 16Q3 20

21 Recovery and Expansion Muted Past and Current Expansions Economic Expansion Average Length Cumulative Growth Annual Growth Pre years 38% 5.00% years 19% 2.80% Current 7.0 years 16% 2.10% Source: Bureau of Economic Analysis and Marquette University. 21

22 Global Capital Seeking Yield Source: WSJ p. C1, June 1,

23 Annual Dividend Yield REIT Dividends Attractive 7.0% 6.0% 5.0% 4.0% 4.8% Average: 3.2% 3.0% 2.9% 2.6% 3.4% 3.2% 2.6% 2.7% 2.0% 1.0% 0.0% Liberty Property Trust Duke DCT EastGroup Prologis PS Business Parks First Industrial 23

24 REIT Occupancies High Avg Occupancy '16 Avg Occupancy '17 Guidance 97.0% 96.5% 96.0% 95.5% 95.0% 94.5% 94.0% DCT DRE EGP PLD Source: Green Street Advisors, LLC 24

25 REITs Outperforming yr. 3 yr. 5 yr. 10 yr. 15 yr. 20 yr. 25 yr. 30 yr. 35 yr. 40 yr. Listed U.S. REITs U.S. Bonds (BC US Aggregate) U.S. Inflation (CPI) 25

26 Potential Disruptor Technology 26

27 Potential Disruptor U.S. Politics 27

28 Potential Disruptor Geopolitical 28

29 Potential Disruptor Automation 29

30 Chinese Automation Growth 30

31 Positive Industrial Outlook It s not a baseball game Business cycle is moderating, less extremes Flat interest rates remove volatility and arbitrage Focus on fundamentals of operations in Commercial Real Estate Increased accuracy of information Merging of Private Equity and Commercial Real Estate sector will bring about greater discipline and transparency All the above will increase focus on lowering costs, fees and consolidation Big and little survive 31

32 Diane Gray President and CEO 32

33 Diane Gray President and CEO, CentrePort Canada 33 33

34 Industrial Site Selection Factors Access, Including to Markets and Logistics Business and Operating Costs Workforce Availability Regulatory Climate Supporting Infrastructure Real Estate Fit SOME ARE GEOGRAPHICALLY VARIABLE 34 2

35 Labour SOURCE:

36 Warehouse Automation SOURCE:

37 Infrastructure Deficit vs Global Supply Chains Canada's current infrastructure deficit is estimated to be somewhere between $350-billion and $400-billion. 37 5

38 Title Logistics Focused Industrial Activity Inland Port and Port-Centric commercial real estate has been the hottest sector of any type over the past five years in the United States, all due to logistics. Bill Luttrell, Senior Locations Strategist Werner Global Logistics 38 6

39 E-Commerce Growth Trend 39 7

40 Capacity vs Demand 40 8

41 Anti-Globalization SOURCE:

42 Impact on Global Supply Chains SOURCE:

43 Canada - U.S. Integration (SOURCE: Trevor Tombe, University of Calgary) 43 11

44 States Trade Map (SOURCE: Statscan) 44 12

45 U.S. Trade with Mexico (SOURCE: U.S. Census Bureau) 45 13

46 Firstronic s Circuit Board Journey SOURCE:

47 Firstronic s Circuit Board Journey SOURCE:

48 Firstronic s Circuit Board Journey SOURCE:

49 Firstronic s Circuit Board Journey SOURCE:

50 Firstronic s Circuit Board Journey SOURCE:

51 Firstronic s Circuit Board Journey SOURCE:

52 Canada s Centre for Global Trade CONTACT: Diane Gray President & CEO DGray@CentrePort.ca

53 Discussion 53 53

54 Thank you! 54 54