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Industrial Brokers Win Newfound Cachet

‘Dogs’ are New Stars as Warehouse-Distribution Sector Becomes Darling of Commercial Real Estate Investors
June 11, 2018

Clark Machemer, senior managing director for Crow Industrial Holdings, at the NAIOP I.CON'18 conference on Friday.
Credit: Linda Moss for CoStar Group Inc.


The real estate brokers who focused on industrial property used to be considered the Rodney Dangerfields of commercial real estate: They got no respect. But with e-commerce raising the importance of the warehouse-distribution business, they say they are finally receiving some props.

The issue came up at the I.CON’18 industrial real estate conference in Jersey City, NJ, on Friday. During one of the event’s panels, Chris Zubel, managing director for CBRE in Chicago, described how brokers from other commercial real estate sectors once looked down at people like him who handled industrial leasing and sales.

More than a dozen years ago Zubel said he took a job for CBRE as an industrial broker in the area by O’Hare International Airport.

"Industrial brokers were literally made fun of as being industrial dogs, right?" he said. "They drove Cadillacs, wore short-sleeved dress shirts, etc."

But every dog has its day.

"I never thought 15 years later we would be the darling of the investment community and attracting foreign sources of capital from all over the world as industrial dogs," Zubel said.

Years back, working as an industrial broker meant sometimes visiting grimy old warehouses or factories. One industrial broker recalls people like him working in the warehouse sector being teased by non-industrial brokers, accused of having dirty shoes. Industrial was not the glamorous side of the business, not like selling or leasing luxury multifamily or retail space.

But the rise of e-commerce and the demand for swift delivery, a consumer demand driven by Amazon, in the past five years or so has given the industrial market a big boost – a constant theme at real estate conferences. Having an efficient supply chain is crucial for retailers, and warehouses and distribution hubs are part of that system.

Panelist Ben Conwell, senior managing director, practice leader for ecommerce and electronic fulfillment for Cushman & Wakefield, described it as "this mashup, this intersection between logistics-supply chain and retail."

So with the growing importance of logistics, purchase prices and rents in the industrial sector have risen, and vacancies in some markets are at record lows, according to several panelists at I.CON’s two-day confab.

  Day One: As Distribution and Retail Sectors Converge, Industrial Demand is Outstripping Supply, ICON'18 Panelists SayJUNE 07, 2018  |  LINDA MOSS

Credit: Moss

A panel titled "Intersection of Retail and Industrial" included Moderator Ben Conwell, (pictured, left to right) senior managing director, practice leader ecommerce and electronic fulfillment for Cushman & Wakefield; H. Gary Gabriel, executive managing director for Cushman & Wakefield of New Jersey; Naveen Jaggi, president, Americas retail advisory services and capital markets for JLL; and Chris Zubel, managing director for CBRE in Chicago.

Hence the sector is now the toast of the real estate industry.

On Friday at I.CON, Clark Machemer, a newly-named senior managing director for Crow Holdings Industrial, said that this year the conference at the Hyatt Regency had record attendance, roughly 850 people. Six years ago, the conference was held in an upstairs Hyatt room just a quarter of the size where it was conducted this week, according to Machemer.

He also said that the nature of industrial brokering, and the kind of people it attracts, has changed.

"It is not our fathers,’ it’s not our grandfathers,’ warehouse industry," Machemer said.

"Today’s warehouse is a logistics business," according to Machemer. "It is both men and women conducting site tours in Teslas with real-time data on their smart phones evaluating transportation costs, labor costs, warehouse throughput, detailed performance specs of the building and supply-chain efficiency," things that weren’t even discussed as part of the industrial real estate business years ago, back when it was "two guys in a Cadillac," Machemer added.

He also told attendees to look around and pay attention to who was sitting next to them.

"See who your peers are," Machemer said. "The diversity of your colleagues is growing. While there is still the need to increase diversification, there are more women than ever before here today. There is age diversity among all attendees."

A spokeswoman for NAOIP, the trade group that held I.CON, said women’s attendance was up this year but she didn’t have an exact number for how many females were at the conference.

During panels on Friday, I.CON’s last day, several real estate executives predicted that food will be the next big disruptor in the industry, because of the nation’s increasing demand for healthier and fresher fare.

At one of those panels, several brokers said that retail is not 'dead,' but simply evolving with the times and adapting to changing consumer habits. Naveen Jaggi, president of Americas Retail Advisory Services and Capital Markets at Jones Lang LaSalle, cited the success of malls in cities like Newport Beach, CA; Dallas and King of Prussia, PA.

"The mall business as an entity overall isn’t dying: It’s just shifting. Let’s not blame the retail sector as dying," Jaggi said.

Offering his takeaway on the conference and the industrial sector, Machemer, who will be based in Montclair, NJ, was upbeat.

"It’s vision, it’s innovation, it’s inspiration," he said. "I think those are three words that six years ago were not mentioned in industrial real estate."



Linda Moss, Northern New Jersey Market Reporter  CoStar Group   
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