TOP TAKEAWAYS: I.CON West 2021 Conference
The I.CON West Conference held this week in Long Beach by NAIOP was extremely well-attended by many of the industry’s finest thought leaders. Of the 600+ registrants, attendees were from all over the western US including Northern and Southern California, Arizona, Colorado, and Texas, and even included some folks from points much further east.
Here are our main takeaways:
- Industrial is definitively a world-class asset class and that status is not likely to change. Although of course one of the “big four” property types in our business, Industrial has rocketed to top status along with Multifamily for most institutional investors, and cap rates have compressed accordingly. Lead by movements in logistics and e-commerce, we’re living in the golden age of Industrial.
- Relatedly, Industrial continues through the pandemic to be the darling of the investment space for both investors and capital providers. Liquidity in the industrial space is at an all-time high and increasing.
- Rents in key gateway markets are sky-high and increasing every few weeks, while rent growth in “end of line” markets are growing much slower. Port-adjacent and logistic hubs are garnering the strongest rent and property value growth, concentrated in just a few areas including Los Angeles County, Seattle, and the Five Boroughs among others. Those in “end of the line” markets such as Denver are seeing growth but much more slowly as those markets are relatively self-contained serving only the local businesses and rooftops.
- Last-mile services are gobbling up warehouse space close to city centers nationwide and breathing new life into older product.
- Special-use build-outs such as cross-dock distribution, micro mezzanine, and cold-storage remain niche and developers are earning so much conventional rent it’s harder to justify the additional capital outlay for a Tenant Improvement-heavy lease.
- Tenants/Users are finding not rents as a key threat to their business operations but instead Labor as the most important factor. Markets located near high-quality labor and reasonable cost of living, such as the Inland Empire will continue to see outsized industrial growth even as automation initiatives expand.
- Finally, all should closely watch what happens in Southern California with the new Rule 2035 which proposes a $1 psf “fee” on 100,000+ square foot warehouses that don’t sufficiently reduce truck emissions at their site, even if they don’t own/control the truck fleet. The widespread alarm drilled into attendees is that this sort of legislation, if unchecked, is coming to a warehouse near you.