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28 DECEMBER 2021
PREACHING PATIENCE
I.CON panel: For spec builders in top logistics markets, it pays to wait to sign a lease
In today’s booming industrial market — with rents rising by the month and supply at unprecedented lows
— developers are now grappling
with a seemingly unprecedented question: How soon is too soon to sign a lease at a building that’s still under construction?
According to some leading owners, it pays to wait.
“I used to say to our investment committee it’s hard to lease space before they see the walls tilt,”
said Devin Barnwell, senior vice president and global head of portfolio management for Brookfield Asset Management’s real estate logistics platform. “People want to see it, they want to know it’s happening.
“Now I’m telling asset managers, ‘Don’t dare lease that space until those walls are tilted and we’re close enough to know what rents are going to look like.’ ”
It was a common theme for Barnwell and other panelists in mid-November
ongoing, record-setting activity in the industrial sector and the pent-up demand for in-person networking opportunities.
As Barnwell and other executives noted during the keynote panel discussion on Nov. 11, investors are clamoring for new speculative space to break ground in New Jersey and other top-tier markets, as tenants continue to snap up buildings well before they’re completed. That has coincided with
a breakneck pace of rent growth in those areas, raising the prospect that developers will almost certainly get a better deal if they wait to sign a lease.
“Now there seems to be a shift toward almost a business strategy ... of
doing that because, with the way the market is accelerating, many times
you’re leaving money on the table,” said Jeff Milanaik, Bridge Industrial’s Northeast region partner, who moderated the discussion.
By Joshua Burd
as NAIOP kicked off I.CON East, the high-profile conference showcasing
the region’s warehouse and logistics sector. Nearly 1,000 developers,
Jeff Milanaik
Devin Barnwell
Barnwell said that is increasingly
the case, although she offered one caveat: “A credit tenant in hand is always a good thing,” so it’s important to balance that certainty with the conditions on the ground and the other opportunities in the submarket.
“It’s knowing what you have and where you fall within the competitive set,” she said. “If you’re the only million- square-footer in New Jersey in a
investors and service providers turned out for the event at The Westin in Jersey City, in a sign of both the
Industrial rents are rising at unprecedented levels in New Jersey and other top-tier industrial markets, raising the prospect that speculative developers will almost certainly get a better deal if they wait until after they deliver a building to lease the space to a tenant.