After decades of skyline-changing developments in Chicago, developer Hines has added an executive to focus on adding the firm’s first industrial buildings as the area undergoes a surge in warehouse demand.
Houston-based Hines said it hired John “Fordy” Gates as a director who will focus on expanding Hines’ industrial portfolio in the Midwest. His top focus will be Chicago, a key U.S. industrial market.
Gates, 33, previously was a vice president at Rosemont, Illinois-based industrial developer Brennan Investment Group.
Gates, who grew up in Chicago’s Lincoln Park neighborhood, is continuing a family business of sorts. His dad, also named John Gates, was the co-founder of CenterPoint Properties Trust and is now executive chairman of another industrial real estate company, TradeLane Properties. Fordy Gates’ brother Ted is an industrial broker in CBRE’s Chicago office.
“Dock doors and clear heights were talked about at the dinner table,” Gates said in an interview.
Hines is known for building trophy office towers in cities including San Francisco, New York, Houston and Chicago. In Chicago, the firm has developed office and residential towers along the Chicago River, including the nearly completed, 60-story Salesforce Tower.
But the firm has been on the industrial sidelines in Chicago, even while boosting its industrial holdings to more than 55 million square feet globally, including more than 25 million square feet now under development.
Only about 4 million square feet of that is in the Midwest. That includes the Whiteland 65 Logistics Center under development near Indianapolis, where a planned second phase will increase the size of the project to three warehouses and about 2 million square feet. Hines also owns 900 Patrol Road, a more than 1 million-square-foot fulfillment center leased to Amazon in Jeffersonville, Indiana, just outside Louisville, Kentucky.
“This is the opportunity to grow and create something like a startup, with the backing of Hines,” Gates said.
Hines is seeking development sites and buildings to buy in Chicago, but the industrial team may follow Hines’ office arm in Chicago, which has leaned heavily toward ground-up development, Hines Managing Director Will Renner told CoStar News.
Chicago’s Industrial Rush
Gates comes to Hines during a boom time for industrial leasing, with overall vacancy in the Chicago area at 4.4%, the lowest in at least two decades, according to CoStar data. With that comes intense competition among developers looking for sites and buildings to buy, and a race by tenants to gobble up well-located space as soon as it’s built.
There will be a need for 330 million square feet of new industrial space in the Midwest by 2025, according to a recent JLL report. That’s a 20% upward revision from the brokerage’s report a year ago, which estimated at least 275 million square feet would be needed to keep up with demand.
“The challenge in industrial is it’s hard to find those opportunities,” Gates said. “Everybody’s fighting for every inch of land. Getting that first deal done will be the hardest. Once that happens, I think there will be a snowball effect.”
Inflation, rising interest rates and other economic concerns are complicating real estate deals, but Hines has the ability to develop and hold properties for the long term, according to Renner.
“We have the ability to hold for a really long time,” Renner said. “In this environment, where the world may look different 6 months or a year or two years from now, the ability to not only execute on real estate but to be able to hold it long term is an advantage for us.”
Gates was responsible for all leasing and operations of Brennan Investment Group’s Chicago and Midwest buildings. Brennan owns 44 million square feet of industrial buildings throughout the country.
This year, Brennan’s deals have included recapitalizing a 39-property portfolio across 27 markets and buying a site in Hoffman Estate, Illinois, where it plans to build two warehouses.
Before working at Brennan, Gates worked at JLL as a research analyst in New York and in an industrial investment sales group based in Chicago.
Gates has a bachelor’s degree from Southern Methodist University and an MBA from the University of Wisconsin’s commercial real estate program.
Local Deals
Houston-based Hines, founded in 1957, oversees assets under management of $90.3 billion in 285 cities across 28 countries. But it's also been doing some industrial work in Chicago.
Hines recently has made Chicago deals on the periphery of the city's industrial market, including a fund’s $97.3 million purchase of the 23-acre Bradley Business Center on the city’s North Side.
That property includes a mix of office, recreational and light industrial uses, and some real estate professionals believe the site eventually would be ideal for an industrial redevelopment. The Hines fund also bought the neighboring WGN-TV studio for $22.5 million.
Also on the city’s North Side, Hines paid $47 million for a loft office building on Goose Island, a longtime industrial area of Chicago.
Downtown, Hines is leading a team of developers wrapping up a three-tower Wolf Point development, which began with two apartment towers and where construction has topped out on the 60-story Salesforce Tower office building.
Hines’ completed office towers nearby include the 52-story River Point at 444 W. Lake St. and the 60-story tower at 300 N. LaSalle St. Hines is seeking an anchor tenant to kick off construction of a 35-story tower at 401 S. Wacker Drive south of those buildings along the river.
“Chicago’s been the heartbeat for Hines in the Midwest,” Renner said. “That’s what we want for industrial.”