Industrial Investment Joint Ventures: Yay or Nay?

After four-and-a-half years of steady but substandard growth with real gross domestic product (GDP) rising at an average annual rate of 2 percent, the U.S. economy is poised to accelerate throughout 2015, says Cushman & Wakefield. An improved economic climate will be highly beneficial to the industrial sector, and with demand for goods from consumers and businesses rising, manufacturing production and shipments will increase at a healthy pace. In addition, imports and exports of goods will also increase more rapidly.

This is all good news for industrial investment, and with I.CON 15: The Industrial Conference coming up in June, NAIOP chatted with Stanley Alterman, executive managing director with USAA Real Estate Company, on an industrial forecast and how long industrial will stay hot.

NAIOP: Looking ahead, what’s your forecast for how long industrial will remain the hottest property type?
Alterman: It may be a little aggressive to consider the entire industrial universe to be the “hottest” property type. Class A industrial is generating more interest than it ever has historically, and we have surpassed “peak” pricing in most first- and second-tier markets, but there are some segments of the market and certain markets that still have some room to run. The interest for industrial property today is really more a byproduct of its acceptance as an investment class. Furthermore, most investors have increased their allocations and want more exposure to industrial. I would further add that investor appetite for industrial is also not isolated to domestic investors, but also foreign investors.

NAIOP: Name three secondary/tertiary markets that are ripe for investment.
Alterman: Three markets come to quick mind:

  • Columbus – 6 percent vacancy and 6 percent rent growth year over year.
  • Salt Lake City – Sub-5 percent vacancy and 5 percent rent growth year over year.
  • Baltimore – over 3 million square feet positive absorption in 2014.

NAIOP: Joint ventures: yay or nay? What are the benefits or pitfalls?
Alterman: The resounding answer is YES on the development side and “sometimes” on the acquisitions side. Here are the pros and cons:


  • Local market expertise and relationships.
  • Partners have the execution platform (especially on the development side).
  • Sharing of “risk.”
  • Commitment to the project, with co-investment equity.


  • During a “cycle” your partner may lose interest in the project.
  • Control – Major decisions.
  • Alignment of interests.
  • Exit strategy – different motivations.

Hear more from Alterman and a great panel of industrial experts discussing an Industrial Investment Outlook 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.

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