Top takeaways: naiop icon west conference

Top Takeaways: NAIOP ICON West Conference

March 19, 2024

The NAIOP ICON West conference, a pivotal gathering for the commercial real estate sector, drew approximately 1300 attendees who engaged in deep discussions about the industry’s current state and future directions. This event highlighted significant economic trends, risks, opportunities within the industrial sector, and shifts in capital markets, alongside examining the evolving landscape of construction costs and federal policies affecting the industry. Below are some of the insights and analyses based on the sessions and expert contributions at the conference.

Economic Overview

  • The economy has gained momentum primarily through consumer consumption, with the service sector outperforming the goods-consuming sector.
  • Job openings have significantly exceeded expectations, leading to a labor shortage, as there are more openings than unemployed workers.
  • Wage growth has been outpacing inflation since August 2023, and household checkable deposits remain high, indicating robust consumer financial health.
  • Inflation concerns persist, with core goods showing a slight decrease, but core services, excluding housing, remain high. Housing services inflation is notably high.

Risks and Challenges

  • The housing market is experiencing a downturn in sales, impacting industrial space demand due to housing’s role as a major economic driver.
  • There’s a noticeable slowdown in garden and furniture sales, and credit card interest rates are high, with a rising delinquency rate.
  • Economic indicators, including the Leading Economic Index (LEI) and forecasts from the NY Fed, suggest a potential recession starting in January 2025.

Industrial Sector Insights

  • Retailer corporate profits have rebounded with inventory levels normalizing, leading to a resurgence in retail sales.
  • However, industrial absorption has slowed in Southern California, with some activity shifting to the East Coast.
  • Developers are focusing on large, big-box distribution projects, indicating a potential increase in vacancy rates and a slowdown in market rent growth.
  • Investment levels are comparable to 2019, signaling robust interest in the industrial sector compared to other asset classes.
  • The trend of onshoring and nearshoring, especially in Mexico, is gaining traction as companies look to diversify their manufacturing and supply chain strategies.

Capital Markets Dynamics

  • Transactions have slowed, predominantly involving single properties rather than portfolios, with a notable increase in private, often all-cash, buyers.
  • Equity capital raising has faced challenges, with a significant shift towards opportunistic investments over core investments.
  • The market is seeing an influx of larger 200-300k sf spaces, with sales pressure arising from tax, investor, and lender motivations.
  • Developers are utilizing life insurance company debt for their industrial construction and value add projects.
  • Federal policies are impacting bank lending capabilities, and there’s a push for incentives to convert office spaces into affordable housing.
  • Tax policy changes are on the horizon, with potential impacts from the expiration of the Trump tax bill and proposed changes by the Biden administration.

Supply Chain and Construction Costs

  • Supply chain issues, including port congestion and labor shortages, are resolving, with ports now competing for market share.
  • Construction and labor costs are a critical concern, with material prices fluctuating significantly, but some relief is seen in faster turnaround times for certain materials and more room for markup due to decreased demand.
  • Key material costs, which saw rapid increases over the past few years, are now beginning to normalize, offering some stability to the construction sector.


The insights from the NAIOP ICON West conference underscore a commercial real estate industry at a crossroads, facing both challenges and opportunities. Economic resilience, driven by strong consumer spending and a robust job market, coexists with inflationary pressures and looming risks of a recession. The industrial sector remains a beacon of growth, albeit with shifting dynamics in absorption and investment focus. Capital markets reflect cautious optimism, with a pivot towards more strategic, albeit conservative, investment approaches. The normalization of supply chain and construction costs offers a glimmer of hope for stabilizing project expenses. As the industry navigates these complex dynamics, the insights from the conference provide valuable guidance for stakeholders aiming to adapt and thrive in an ever-evolving market landscape.

Jason Wang
Assistant Vice President
D: 650.443.9033