CRE Midwest

Newmark Grubb Knight Frank’s Kasselman: The industrial real estate market is doing phenomenal

Geoffrey Kasselman, SIOR, LEED AP, Executive Managing Director, National Industrial Practice Leader for Newmark Grubb Knight Frank, recently shared with Illinois Real Estate Journal his passion for the business, and updates on the industrial real estate market. Here’s what he had to say.

GeoffKasselmanGeoffrey Kasselman, SIOR, LEED AP, Executive Managing Director, National Industrial Practice Leader for Newmark Grubb Knight Frank, recently shared with Illinois Real Estate Journal his passion for the business, and updates on the industrial real estate market. Here’s what he had to say.

Illinois Real Estate Journal: How did you get your start in industrial real estate?

Geoff Kasselman: I moved here from Detroit to escape my Dad’s rather large shadow (he was the Branch Manager of the Cushman & Wakefield office in Southfield, MI at the time). I had three different offers with real estate firms here – two to be an office broker and, the most compelling, an industrial broker. It sounded like the fastest path to success and the broadest possible education as a real estate professional. I’m happy to say both proved to be true.

IREJ: How have the first and second quarters gone?

GMK: Phenomenally (as I knock on wood). It is great to see the economy and the business both doing so well. We’re continuing to see solid growth and the deal flow and related activity has strong velocity. The lack of new construction (until quite recently) and pent up user requirements created disequilibrium between supply and demand. Despite Illinois’ economic challenges, businesses are still drawn to the region’s central location as Chicago industrial continues to be one of the strongest markets in the nation – a true sign of the area’s strength.

IREJ: What are your expectations for the rest of the year?

GMK: I expect us to finish the year strong, continue the momentum well into 2015. All the same dynamics are – and should be – still in play. The rise of ecommerce should carry on, fueling demand for warehouse space, while O’Hare, the I-55 Corridor and the Far North submarkets will continue to lead the charge.

IREJ: Are there any new developments in the pipeline?

GMK: NGKF researchers are tracking at least 24 new construction projects in the Chicagoland area that have already broken ground, and there are approximately another 15 that are likely to commence later this year and in early 2015. We haven’t seen this sort of activity since 2007. The balance between build-to-suit and speculative activity is healthy. Retailers and logistics companies, along with the e-commerce mega big-box need, are the main industries driving demand. For example, Michelin just announced the signing of a 1.7 million-square-foot warehouse lease south of Joliet. This is the biggest industrial build-to-suit development in eight years.

IREJ: Are there currently any updates/ market trends?

GMK: Pretty much all submarkets are having strong activity so the trend is up. One thing to watch for is new construction pricing and materials availability. It would not surprise us to see some capacity constraints creep into the picture which could slow projects down and/or cause price increases. We are also tracking anticipated energy disclosure mandates in some communities and big data analytics for all properties. It’s about to be like “Moneyball” for buildings, where new sabermetrics and custom algorithems rule the life cycle of any real estate asset.

IREJ: Please share some of your company’s recent successes.

GMK: Some notable local NGKF completed transactions so far this year include Assemblers’ 270,789-SF lease in Bedford Park; Orbus Exhibit & Display Group’s 347,400-SF BTS lease in Woodridge; TVI / Savers’ 149,039-SF lease in Melrose Park; 1001 N. Mittel Dr. – 116,140-SF corporate HQ sale (and now listed for lease) in Wood Dale; and, Heys Luggage’s 54,153-SF new construction lease in Elgin. We have also invested significantly in our human capital, bringing on top talent with more new hires on the horizon.

IREJ: What do you find most challenging about industrial real estate?

GMK: Building collaboration among all stakeholders in a project, especially the larger, more complex ones, can be quite a challenge. Principals, managers, brokers, lenders, attorneys, architects, municipal authorities, contractors, and vendors, among others, all sifting through plans, files, documents, leases, contracts, emails, pictures, maps, graphics, data and analytics, can be incredibly time consuming. But, I suspect this is true of all commercial real estate projects, not just industrial.

IREJ: What do you like most about industrial real estate?

GMK: It’s an essential asset class, at least until you can teleport large items through the air like in Star Trek. It has longevity. It also has some inherent recession-resistance, so whenever the economy takes a dip, there is still some industrial deal activity and a faster overall bounce-back. I also like the community that deals with industrial real estate – I meet the most fascinating folks and many have become close friends.

IREJ: After being in the industry this long, what’s the passion/driving force that keeps you coming into work every day?

GMK: Helping clients solve real-world operating challenges and business dilemmas is incredibly rewarding for me. I also enjoy being progressive by constantly learning how to create more value for everyone tomorrow than I did the day prior. And I never have the same day twice!

IREJ: What do you like to do when you’re not working?

GMK: We have a vacation home in Northern Michigan and I just cannot get up there enough. I’ve also been binge-watching AMC’s Breaking Bad, having just finished Season 4 last night. I love reading Fast Company to stimulate ideas for innovation and opportunity.

IREJ: If you’re watching the World Cup, which teams are you rooting for to win and why?

GMK: Team U.S.A. of course! Even though they are much improved, they are legitimate underdogs and FIFA stacked the odds against them. Wouldn’t it be great to see them pull off a “Miracle on Grass” like the U.S.A. hockey team from 1980?

IREJ: Is there anything else you’d like to add?

GMK: Thanks for this great opportunity to share a bit about a day in the life of an industrial real-estate broker. I would also like to add that as great as things seem to be, it is important not to forget the cyclical nature of this business and where we all were just a few short years ago. But, onwards and upwards.