In almost every market, industrial property demand continues to surpass supply. Cushman and Wakefield reports that the U.S. industrial vacancy rate dropped to its lowest level in more than 10 years at year-end 2014, marking a year of progress also punctuated by strong leasing totals, impressive occupancy gains and healthy rent growth.
General contractor Millie and Severson has been hard at work, partnering with developers, owners and investors to build some of industrial’s top properties. The company has signed on as a Gold sponsor of I.CON ’15: The Industrial Conference, and NAIOP chatted with Senior Vice President John Grossman on all things industrial.
NAIOP: Why is industrial keeping a stronghold as the hottest property type and what’s driving the demand?
Grossman: Increasing tenant demand for industrial product is driving this market segment. The advent of e-commerce businesses, as well as continuing demand for more logistical space, continues to help the industrial segment to expand. Additionally, an increase in rental rates have provided additional impetus to current market demands.
NAIOP: What must industrial real estate service providers do to stay competitive?
Grossman: For a general contractor, having a formal quality control program to monitor the various components of a project, providing a seasoned and dedicated project team, and consensus from all team members regarding the goals and objectives are indispensable in delivering a quality project outcome for each owner. Here are my top three tips:
- Maintain the ability to rapidly and proactively respond to a client’s needs in this accelerating market environment – it is critical to preserving a competitive edge. Being adaptable and agile is necessary in today’s world in order to satisfy client demands for critical information such as accurate conceptual cost and schedule estimates delivered early in a project’s inception.
- Time to market delivery for each project is vital to every client. Careful planning to recognize potential schedule concerns and means of how to mitigate these prospective issues is a hallmark of every successful contractor. Recognizing that clients have prospective tenants with specific schedule requirements and unique construction needs necessitate that a contractor must understand and accommodate these desires with a cost effective and timely approach. Each service provider must be sensitive to accommodating client’s needs to understand and maintain critical dates while ensuring that rigorous quality standards are implemented and maintained.
- Superior quality of both design and construction is paramount to providing a competitive edge for each owner in the marketplace. In competitive markets such as Southern California, it is especially imperative that owners must deliver modern industrial buildings that incorporate efficient design and the latest technologies that translate into desirable space for prospective tenants.
NAIOP: What factors are most changing industrial? How must companies adapt?
Grossman: There are a number of factors that are challenging and changing the world of industrial real estate. We must remain aware of the Panama Canal expansion and how it will impact cargo deliveries to the West Coast as ports for both the Gulf and East Coasts prepare to expand their capabilities to accept these larger container vessels. Investment in infrastructure projects that enable goods as well as expanding terminal capacity at the ports is critical in order to remain competitive. A second issue involves the California legislature and the dimming prospect for tax incentives for the cargo of importers and exporters in California. It is imperative that these tax incentives are approved in order to provide a more competitive environment against these other East and Gulf Coast ports.
NAIOP: Why is NAIOP’s I.CON sponsorship investment valuable to your company?
Grossman: Millie and Severson’s sponsorship of NAIOP’s I.CON reasserts our commitment to NAIOP and the important work it does on behalf of our industry. I.CON provides us with the opportunity to gain information about the latest industry trends and to network with existing clients and develop new relationships.
Celebrating its seventieth year, Millie and Severson General Contractors is a premiere industrial builder in the Northern and Southern California markets and takes in its ability to provide exceptional service in an honest, hard-working environment.
Meet Millie and Severson at I.CON ’15, June 10-11 in Long Beach, California. See the conference website for details on who attends, hot sessions, and project tours.
Kathryn Hamilton is Vice President for Marketing and Communications at NAIOP Corporate.