Five Big Industrial Growth Engines

Market Insights

Five Big Industrial Growth Engines

By Jennifer LeClaire

MIAMI—More than 200 industrial commercial real estateprofessionals gathered at the Viceroy Miami on Wednesday for Real Share Industrial 2015. With standing room only, Walter Byrd moderated the Industrial Power Panel: A View From the Top.

Panelists included Michael Brennan, chairman and managing principal of Brennan Investment Group; Rene Circ, director of industrial research at CoStar Group;David Harker, executive vice president of First Industrial Realty Trust; and Geoffry Kasselman, executive managing director at Newmark Grubb Knight Frank. During the panel, Brennan outlined five big industrial growth engines.

“While doing due diligence we looked at the causes behind what’s going on in the market,” said Brennan. “Whether you listen to CBRE’s research or CoStar’s you’ll find the broad-based nature of the recovery is remarkable. As a firm that buys in a bunch of different cities, the underlying causes are really important for us.”

With that, Brennan ticked down a list of five factors that are positively impacting the market. The first is the Obama administration’s efforts to help the auto industry recover.

“They kept the UAW alive and lowered their costs,” Brennan said. “US automaker’s costs are equal to foreign competitors. Putting the auto industry back on track was important for industrial real estate because they have a long supply chain.”

Second, the housing industry is back on its feet. Although Brennan admits single-family housing starts are not strong as they once were—the industry is not seeing as many housing starts as it did in years past—the multifamily sector is helping to make up the difference.

The third industrial growth engine is the energy business.Brennan said new technology has brought in a massive amount of demand for machines, retrieval equipment, and everything else you need to build the infrastructure of the energy business. Ranking fourth on Brennan’s list is a retooled banking industry that inked $1 trillion in new loan originations in October. Finally, there’s the China factor.

“China’s hurting because energy costs are much cheaper so especially in natural gas and because we are bringing automation,” Brennan said. “China’s got more domestic demand so they are not as willing to make dresses for one dollar. Now you have to pay five dollars.”