Restraint and Discipline Bright Spots in Industrial Market Weakness
May 18, 2010 | Staff Writer | Print Article | Email this Article
Jim McShane knows a thing or two about real estate and recessions. This latest recession is the sixth the president of The McShane Companies has seen in his career. Yet according to McShane, this recession isn’t like any other.
The other recessions were caused, in part, by tremendous overbuilding of commercial real estate. This one was the result of the capital meltdown; a meltdown he says began a couple of years ago and anticipates is likely to last for up to another 18 months.
“The market has shown more discipline than in the past,” McShane said. “This downturn is not about overbuilding.” Instead, he said during this recession “we’ve had the market pulled out from underneath us.”
McShane offered his thought is advance of the CIP (Chicago Industrial Properties) Industrial Summit being held on June 9, 2010 at the Fountain Blue Conference Center in Des Plaines. McShane is one of the headliners kicking off a panel discussion looking at the realities of today’s market and what to look for in the days and months ahead. He will be joined on the panel by Brett Kroner, CB Richard Ellis; Paul Fisher, CenterPoint Properties; Mike Brennan, Brennan Investment Group; and Pat Gallagher, The Alter Group. The panel will be moderated by Keith Stauber, who recently joined Jones Lang LaSalle.
According to McShane, the realities of today’s market include increased vacancy rates, downward pressure on rents, much more stringent restraints from banks on capital, more equity required to make a deal happen and a constant search for new sources of capital. “Credit is tight and encumbered,” McShane said. “We are all out there looking for equity,” McShane said.
At the same time, he did cite leading economic indicators that are beginning to point to better days ahead. When asked how he will know when the recovery has made its way to commercial real estate, McShane responded, “When I see an actual groundbreaking for a speculative industrial building.” He made the distinction between a groundbreaking and an announcement saying, “(as an industry) we announce a lot of things that don’t always move forward.”
In the meantime, McShane believes patience and discipline are in order. Further, McShane firmly believes there are lessons to be learned from what the industry has experienced over the last several years. “As an industry we need to focus more attention on leading economic indicators, not just where to put the next building,” he said.
Chief among the economic indicators on McShane’s watch list is job growth, followed closely by consumer spending and housing growth.
Tags | Chicago, industrial, The McShane Companies
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