Industrial Trends with NAI Hiffman’s Kelly Disser
REjournals: What are the key trends shaping the current industrial market, and how have they evolved over the last year?
Kelly Disser: Fed funds and interest rates are a major factor, as they are impacting cap rates and required yield on cost for development. This relatively quick adjustment/increase has caused a slow down in terms of the amount of new development and new construction as compared to recent years.
The volatility of the rates and increased costs of funds (debt and equity) has caused an increase in required returns of investors. It has also caused a general slow down in the capital markets and investment world as many investors have been more cautious to evaluate how the market evolves, or to possibly wait and see how it plays out.
REjournals: What are the main factors driving demand, and what types of industries are driving this growth?
Disser: The American consumer continues to have the ability to spend—on both services and goods. The supply chain growth to ensure that these products are deliverable to end consumers has resulted in continued leasing activity and absorption. The net result of this leasing/space demand has been rental rate growth.
In regard to demand for investment/capital flows, the demand continues to grow as many investors have not deployed as much capital in the past 12 months due to the volatility. When we start to see some stability in the capital markets, we expect to start to see capital flows again and potentially a rush given the pent up demand of past 12 months.
REjournals: What challenges exist for investors and developers, and what strategies can be employed to navigate them effectively?
Disser: Navigating interest rate risk and a volatile debt market. In many cases additional equity is required to underwrite and fund deals.
Disser will speak at REjournals’ upcoming 20th Annual Chicago Industrial Real Estate Summit, to take place on June 20, 2023 at Hyatt Lodge in Oak Brook, Illinois. To register for this event, click here.
About NAI Hiffman:
NAI Hiffman is one of the largest independent commercial real estate services firms in the US, with a primary focus on metropolitan Chicago, and part of the NAI Global network. We provide institutional and private leasing, property management, tenant representation, capital markets, project services, research, and marketing services for owners and occupiers of commercial real estate. To meet our clients’ growing needs outside of our exclusive NAI Hiffman territory, we launched Hiffman National, our dedicated property solutions division, which provides property management, project services, and property accounting services across the country. NAI Hiffman | Hiffman National is an award winning company headquartered in suburban Chicago, with more than 250 employees strategically located throughout North America.
About Hiffman National:
Hiffman National is one of the US’s largest independent commercial real estate property management firms, providing institutional and private clients exceptional customized solutions for property management, project management, property accounting, lease administration, marketing, and research. The firm’s comprehensive property management platform and attentive approach to service contribute to successful life-long relationships and client satisfaction. As a nationally bestowed Top Workplace, and recognized CRE award winner, Hiffman National is headquartered in suburban Chicago, with more than 250 employees nationally and an additional six hub locations and 25 satellite offices across North America.