THANK YOU
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RECAP
735
ATTENDEES
CUSHMAN & WAKEFIELD PROFESSIONALS
414
CLIENT PROFESSIONALS REPRESENTING
124 FIRMS
321
SPONSORS
38
SESSIONS
15
SPEAKERS
45
THANK YOU
INTERCHANGE 2023: The Cushman & Wakefield Logistics & Industrial Conference and Expo surpassed all expectations! We express our gratitude to our sponsors, clients, colleagues, and leaders.
With an impressive attendance of 735 participants and a diverse range of 15 sessions, our time in Scottsdale was filled with numerous learning opportunities and valuable connections. Engaging discussions on topics such as the economy, sustainability and manufacturing delivered practical insights, while networking allowed for the exchange of perspectives. It is evident that the logistics and industrial real estate market continues to thrive.
We extend our sincere thanks to all who attended on behalf of the entire organization. Enclosed, you will find an event recap complete with captivating photos, notable content highlights, and much more. Until we meet again at our next event, we remain grateful for your support!
Nicole Bennett
Jason Tolliver
Americas Logistics & Industrial Lead
Americas Logistics & Industrial Lead
SPONSORS
GENERAL SESSION HIGHLIGHTS
Recession Jitters? How Industrial CRE is Poised to Perform Amidst a Downshifting Economy
Paradigm Shift: Perspectives for the Next Era of Industrial Investment
Evolution is Essential: Meeting the Needs of Today’s Tenants
Paradigm Shift: Perspectives for the Next Era of Industrial Investment
Abby Corbett, Head of Investor Insights, Cushman & Wakefield
Megan Royer, Manager, Acquisitions/Dispositions, Prologis
Matt Chapman, Managing Director, Investments, Link Logistics
Jim Carpenter, Americas Co-Head, Industrial Advisory Group, Cushman & Wakefield
Will Strong, Americas Co-Head, Industrial Advisory Group, Cushman & Wakefield
Red Shirt or Brown Pants? Definitely Red Shirt.
In a downshifting economy, the industrial CRE sector is poised to bend (slightly) but certainly not break. The economic outlook continues to be mired in uncertainty, but red flags from an array of leading indicators are pointing to a slowing in growth and, ultimately, a moderate recession. With wage growth still running hot and reaccelerating in recent months in a remarkably resilient (though cooling) labor market, a Fed pivot seems unlikely despite the recent turmoil in the banking sector. Expected to hold at its current rate through the end of this year, the culmination of monetary policy and generally tighter credit conditions will weigh on the ability of companies to invest and consumers to spend, particularly on interest rate-sensitive purchases. Coupled with a rotation of consumer activity back toward services and experiential retail, a temporary lull in goods spending is a feature of the near-term outlook.
For industrial, it’s not doom or gloom, though. Demand for industrial CRE did start to slow in recent quarters from its breakneck pace recorded during the pandemic, and while that is expected to continue, the forecast still calls for over 400 million square feet (msf) of space to be absorbed in 2023 and 2024 combined. This is slightly cooler than the ‘equilibrium’ (of about 275-300 msf per annum) but still far shy of a downturn in the sector. Vacancy, partly as a result of this, will go up but only to a limited degree. Despite being elevated at over 660 msf, the construction pipeline is already 30% accounted for (by spec preleasing or BTS tenants), and given the low prevailing vacant stock—much of which does not meet the needs for modern tenants—more of that space will be leased prior to hitting the market. What this really means is that even with slower demand and a wave of new product delivering, vacancy is expected to peak by the end of next year at about 5.5%. This is still 150 bps below prior cycle lows.
This backdrop is a key factor buttressing continued rent appreciation across the country, which is predicted to roughly halve from last year’s pace toward 10% before tempering further in 2024. Further, as existing leases reprice to today’s rents (let alone the higher expected rents in the years ahead), occupiers will face substantially different increases in real estate costs than any one year’s rent growth figure. In turn, this is feeding a very bullish outlook for income growth across investors’ portfolios. And that is great news for investors as an income-focused era permeates the capital markets. Higher debt costs will affect all assets, including CRE and industrial. However, the period of higher cap rates will be finite, and if the outlook script unfolds roughly on target, then interest rates will be tempering off of peak levels as 2024 comes to a close, providing a tailwind to investors to realize capital returns again. Indeed, compared to other assets—from corporate bonds to stocks to commodities—industrial CRE total returns have been more than double the next best performer, and over the coming years, that magnitude of outperformance is expected to continue.
Recession Jitters? How Industrial CRE is Poised to Perform Amidst a Downshifting Economy
>> VIEW SLIDES
Rebecca Rockey, Deputy Chief Economist, Global Head of Forecasting, Cushman & Wakefield
Keeping up means staying ahead of the competition and that takes scale, expertise and all the essentials needed to compete in today's global supply chain. At INTERCHANGE 2023, Scott Marshall, Chief Customer Officer at Prologis, discussed how tenant needs are changing, factors driving their selection process and how Prologis is evolving its business to help tenants address some of their biggest challenges.
Prologis’ Broker-Powered 2023 Logistics Real Estate Outlook Takeaways (commissioned February 2023):
• Majority of respondents share a bullish outlook
• Top leasing drivers: Business growth, need to secure space amid scarcity and leasing to address warehouse operational issues
• Construction cost expected to rise; Prologis is already noting the opposite
• Technology will shape requirements in the future, particularly automation
• Green-centric improvements are expected to be more important for ‘many’ or ‘some’ customers in 2023
• Varying trends by geography: Strong demand in Texas; price as a secondary decision factor in the Midwest; next wave of
sustainability improvements in Californian markets
Evolution is Essential: Meeting the Needs of Today’s Tenants
>> VIEW SLIDES
Scott Marshall, Chief Customer Officer, Prologis
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TREND TALKS STAGE HIGHLIGHTS
Over the past two to three years, developers have been increasingly focused on reducing embodied carbon. Tackling carbon early means more opportunities for reductions in the construction process, including using alternative materials and recycling concrete and steel. To create a better business case for ESG in logistics and industrial buildings, be the advocate in the room, prioritize the utilization of existing buildings as the most sustainable option, and plan for new construction in the most sustainable way by starting early."
Senior Project Manager
Energy & Sustainability Services
Megan Krest
Head of Logistics & Industrial
EMEA
Tim Crighton
Executive Managing Director
Business Incentives Practice
Cushman & Wakefield
Jason Lake
Senior Consulting Analyst
Location & Labor Analytics
Logistics & Industrial Services, Americas
Cushman & Wakefield
Matt Niehoff
Developers and landowners can benefit from the resurgence in manufacturing by creating a site selection strategy that seamlessly integrates with local government and utility providers. This can solve for the larger utility and labor requirements of manufacturing users."
A Better Box: ESG’s Value Creation for Logistics & Industrial Buildings
Director
Logistics & Industrial Services
Cushman & Wakefield
Helen Cauthen
Senior Vice President, Market Officer
Link Logistics
WES VAUGHAN
Inking deals requires open and transparent communication. Both landlords and brokers excel when they remain in front of the market, understand the deal landscape and trust. When both parties wholeheartedly invest in trust, there’s a mutual understanding that each side has the best result in mind for the long-term health of the market."
Senior Research Director
U.S. Industrial & Logistics
Cushman & Wakefield
Jason S. Price
Director
Americas Head of Logistics & Industrial Research
Global Research
Cushman & Wakefield
Carolyn Salzer
Houston reigns as the top emerging market. With nine deals over one million square feet (msf) in the past few years, Houston’s success can be attributed to thriving e-commerce and retail wholesaler activity. From 2020 to 2022 alone, new leasing activity totaled over 131.3 msf. Other emerging markets such as Charlotte, Columbus, Indianapolis, Kansas City, Memphis and Phoenix also registered healthy demand totals among key occupier sectors."
Executive Managing Director
Americas Logistics & Industrial Lead
Cushman & Wakefield
Nicole Bennett
Chief Commercial Officer
NPSG Global
Bryan Knott
Disruptive technology is enabling just-in-time fulfillment and replenishment of brick-and-mortar stores, eliminating the need for traditional back-of-house operations. With the removal of racks, stores can now incorporate micro-fulfillment technologies to efficiently handle click-and-collect orders, whether in-store or curbside pickup. This trend significantly impacts the retail and e-commerce sectors, and extends upstream to warehouses, shaping how they fulfill the demands of these brick-and-mortar stores."
Senior Managing Director, Client Solutions & Strategy
Cushman & Wakefield
Ben Harris
President & CEO,
Council of Supply Chain Management Professionals
Mark Baxa
Occupiers currently find themselves grappling with stockpiles of inventory because of misaligned consumer demand in the post-COVID era. Simultaneously, they face the daunting task of adapting their warehouse strategies and space requirements. The lack of available space, coupled with inventory challenges, and port strike concerns on the West Coast, is reason for occupiers to shift operations to the East Coast. However, this shift in distribution models brings its own set of challenges, including increased incoming volumes on East Coast ports and added pressure on infrastructure."
Senior Director,
Food & Beverage Advisory Practice Co-Lead
Cushman & Wakefield
Chris Copenhaver, SIOR
Principal | Leasing
Saxum Real Estate
Matthew Wassel
Cold storage development is seeing an explosion across the country, with varying degrees of success. When considering speculative development opportunities, level of finish, ceiling height, and rising construction costs are among the various risk factors."
Resurgence of Manufacturing: Impacts of Labor, Utilities & Infrastructure on Location Decisions
Inking The Deal in 2023: What Brokers Can Expect This Year
Who & Where? Emerging Markets & Tenant Types for Industrial Growth
Disruptive Technology:
Doing More with Less
Changing Tides: Supply Chain Shifts & The Impacts on CRE
The Evolution of Cold Storage: Minimizing Risks & How to Capitalize on Increased Demand
Chief Executive Office
NPSG Global
Tad Selby
AWARDS
RISING STARS
Trevor
Berry
Taylor Zambito
Capital Markets
Leasing
Karen Hromin
Account Manager for
Ares Industrial Management
account manager of the year
industrial asset services
Cassidy Cunningham
PARTNERSHIP AWARD
Mindy Lissner
CULTURE OF COLLABORATION
Top Industrial capital markets Professional
Phil Lombardo
Top Industrial Leasing Professional
Will Strong
INFO WAREHOUSE
Supply Chain & Logistics Advisory
Location &
Labor Analytics
Client Solutions & Technology
Total Workplace Consulting – Business Incentives Advisory
Asset Services
Energy & Sustainability Services
Project & Development Services
Valuation & Advisory
Property Marketing Center of Excellence
Senior Managing Director, Client Solutions & Strategy
ben.harris@cushwake.com
Ben Harris
>>VIEW COLLATERAL
Senior Managing Director, Client Solutions & Strategy
ben.harris@cushwake.com
>>VIEW COLLATERAL
Ben Harris
Logistics & Industrial Technology Solutions Lead
cassidy.cunningham@cushwake.com
Cassidy Cunningham
Executive Managing Director
elisa.konik@cushwake.com
>>VIEW COLLATERAL
Elisa Konik
>>VIEW COLLATERAL
Sam Collison
Senior Managing Director
sam.collison@cushwake.com
Managing Director
rachel.schiftan@cushwake.com
>>VIEW COLLATERAL
Rachel Schiftan
Senior Managing Director
jon.zimmerman@cushwake.com
>>VIEW COLLATERAL
Jon Zimmerman
Senior Director
michael.morehead@cushwake.com
Michael Morehead
Executive Managing
Director
mike.schaeffer@cushwake.com
>>VIEW COLLATERAL
Mike Schaeffer
Senior Marketing Director
krissy.daily@cushwake.com
>>VIEW COLLATERAL
Krissy Daily
PHOTOS
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SPONSORS
GENERAL SESSION HIGHLIGHTS
TREND TALKS
AWARDS
INFO WAREHOUSE
PHOTOS
Sentiment throughout the conference was notably upbeat, and the mood has improved in the wake of what was a tumultuous first quarter. Despite that, clarity on the macroeconomic outlook hinges largely on the path of inflation and on monetary policy. Focus remains on industrial’s robust fundamentals, and on the fact that vacancy (even in the worst of scenarios) is still expected to remain below the lowest point reached in prior cycles. To put that into context, Cushman & Wakefield’s forecasts call for an upward shift in vacancy from ~3.5% to ~5.5%, which is still exceptionally tight. Therefore, even despite an expected moderation in demand, the prevailing market tightness will still generate robust rent growth, which will help to support NOI growth in the years to come. These are the very conditions which are providing the industry’s most prominent owners and investors with ongoing conviction in the sector for the medium- and long-term.
- Perspective is everything. Such perspective extends beyond the points mentioned on relative vacancy tightness. Extending this concept throughout the capital markets, interest rates are normalizing (meaning they are coming off a period of a unique lower-bound); a reversion back to 2%-4% treasury rates is consistent with many other points in history. The difference now, of course, is that the period of such significant cap rate compression is cooling, and we’re coming off a period of exceptional return prospects. Yet, a moderation does not imply forward-looking 3-, 5-, and 7-year returns will be negative. In fact, industrial’s forecasted cumulative total returns are projected to outperform against the context of both a downshifting economy as well as downshifting cross-asset class returns (whether that be compared to other CRE sectors or to other financial market instruments such as high-quality corporate bonds).
- Investors realigning to their core competencies. Over the last few years as the market accelerated, bringing with it newfound capital, some investors stretched along with it: either accepting overly rich going-in pricing, negative leverage or pushing out on the risk spectrum from a strategy perspective. Now that the market has receded somewhat, investors are refocusing on the strategies they were deploying pre-run up.
- Focus is shifting back to the basics. Against this period of interest rate normalization and given the fact that cap rate compression is no longer a fail-safe strategy, we are now in an income-oriented era. Properties with shorter WALT are generating strong interest, all as property resilience is being redefined against the context of tenant quality, even down to tenants’ industry-quality characteristics.
- Alongside the return to basics, the proverbial flight continues, whether that be flight to quality from an asset quality standpoint, a market or submarket standpoint, tenant credit-quality standpoint, or even a sponsor or partnership standpoint. The market has been repricing debt, but risk spreads for industrial haven’t blown out in the aftermath of the volatility witnessed in quarter one. Caution persists, but the general view of risk has not fundamentally shifted from where it was at the start of the year. Real-time pricing appears to have shifted up about 100 bps across the board (more for secondary and tertiary markets).
Paradigm Shift: Perspectives for the Next Era of Industrial Investment
Common Investor Themes:
READ MORE >>
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- Debt-related conversations and capital stack considerations continue to take the lead, which is positioning highly liquid, nimble and flexible cash-buyers at a relative advantage. Debt remains highly selective and is targeting quality of asset and quality of sponsor, all as capital stacks are growing increasingly complex.
- The pool of active buyers continues to diversify. While some heavy-weight institutional, open-end, and public buyers are still largely in pause/wait-see mode, this is allowing for other institutional investment managers with closed-end or separate account funds, private investors, and HNW investors to emerge as more active sources. Our on-the-ground, real-time intel continues to witness broadened and stronger interest on a deal-by-deal basis, with an increasingly robust pool of buyers who are showing more engaged, active interest in marketed deals.
- Amassing land remains an attractive strategy for industry giants, particularly given the relatively more appealing cost-bases that some sectors are offering right now.
- Fundraising remains powerful leading indicator to investment activity in the years to come. Closed-end fundraising momentum has downshifted from the breakneck levels seen over the last couple years, but capital raising remains pretty darn robust all things considered. YTD-fundraising for funds strictly targeting industrial is measuring at over $11.8 billion, which is notably healthy (60%) of the $18 billion all-time high reached in 2022. And the story gets even more interesting: value-added funds comprise upwards of 90% of fundraising by strategy profile for industrial-only funds in 2023 YTD, all of which means that competition for this profile is going to remain exceptional. Diversified fundraising strategies (targeting a broader spectrum of property-types) also remain a popular strategy, with YTD fundraising at $37.8 billion. Closed-end diversified funds will still be positioned to emerge as an active buyer-source as conditions loosen, as they raised $78.2 billion in 2022, 75% of which was geared toward value added and opportunistic strategies.