Louie : I have invested in and managed warehouses for over 20 years .
Gonzalez : My company , DEODATE , has worked with large , multi-national logistics companies in strategic facilities / real estate growth . I have also dealt with local municipalities , regional freight partners , and state agencies . Our brokerage division , DDTRE , also has secured sites for mid-sized logistics companies . I have been in this sector for over a decade .
CLDA Mag : How will the 2024 real estate market be different than the 2023 market for those in the logistics sector ?
Benko : In 2024 , you will have more capacity coming online in larger cities . This additional capacity will offer less leverage to institutional landlords like LINK , who have enjoyed almost full capacity and 30 % to 70 % rate increases since 2020 . I don ’ t anticipate rates to regress significantly , but I do see some softening . The occupancy rates nationwide have been very tight for several years , allowing landlords to charge historically high base rental rates and higher escalators . That , coupled with escalating common area and maintenance fees ( due to insurance rates , rising taxes and the overall cost of materials going up ) has produced a challenging landscape for companies needing warehouse space .
Chin : We expect to see higher costs of capital and fears of recession that will slow down the development pipeline . 2024 will be the test to see if workers return to the urban cores and re-activate downtown businesses as both the public and private sectors incentivize workers to return to the office .
Louie : I don ’ t foresee conditions changing much in the next 12 months because I expect this “ high ” interest rate environment to continue through 2024 with a potential recession in mid to late 2024 .
Gonzalez : This will vary by market size . In primary Metropolitan Statistical Areas ( MSAs ) like NY / NJ , SF / OAK , LA , and Seattle , logistics firms are facing heightened competition for land . This competition is not only coming from industrial real estate investors and owner-users but also from municipalities looking for land at scale to utilize to cope with ongoing housing shortages .
While a pending commercial real estate debt correction is likely to take place over the next 24 months , there are opportunities on the horizon for assets currently secured by low-income rate debt . These assets , upon refinancing , may come to market due to owners ’ inability to qualify for debt service .
In addition , secondary and tertiary markets near ports or inland metropolitan areas may see the next 12 months as opportunistic . They could step into experimental leases and inventory that become available due to outside interest rates or recessionary concerns .
Furthermore , as municipalities near ports adjust zoning codes to restrict logistics usage , landlords may lag in adapting to changes in logistics firms ’ capacity to maintain recent high
46 customized logistics & delivery Magazine I FALL 2023