Insights from Experts: MNCAR Developer Update

6/15/2016
Tags:

Phil Cattanach, Director, Real Estate Development
Years with Opus: 10 years
Project Credits: Xcel Energy – SPS Amarillo Headquarters, Gander Mountain Stores, Valley Park Business Center, Plymouth Point Business Center, 169 Business Center & More
Event Name: MNCAR Developer Update
Sponsor Organization: Minnesota Commercial Association of Real Estate/Realtors

Key Points:

  • The program highlighted new projects in the market, including AmerisourceBergen (phase II) and phase III of Valley Park Business Center, Plymouth Point Business Center, 169 Business Center and Southeast Industrial Park.
  • Investor appetite remains very robust for industrial product. We’ve seen the influence of outside investors chasing the more favorable returns offered within the Midwest. The only caveat is the institutional investors tend to look for larger acquisitions, leaving assets less than $15MM for more regional or local buyers. Fortunately, this market continues to have a strong buyer interest that continues to support the fundamentals for good industrial product trading with compelling economics.
  • The industrial market tends to have a very short response time for a requirement. Due to consistency between end users, replacing industrial tenants continues to keep well positioned assets leased. With exception of the larger, more customized build-to-suit opportunities, it is generally difficult to respond to a user’s timeline without having a building either available or going vertical. Rarely are users, especially those needing less than 40,000 square feet, looking for space more than six months in advance. As such, the speculative market will continue to be compelling when the submarket metrics indicate a lack of quality industrial space available. 
  • Overall the entitlement timeline for larger industrial parks is longer given the Environmental Assessment Worksheet (EAS) with potentially an Environmental Impact Study (EIS). Many of the larger, multi-phased industrial parks, such as Valley Park Business Center in Shakopee, necessitate a front-end investment by the developer to position the real estate in such a fashion that it can respond to the generally shorter lead times typical of the industrial asset class. In summary, Entitlements are, as always, a key ingredient to differentiate a site from the competition and only seem to be growing in the duration and complexity as Opus continues to advance developments in well positioned locations.