GlobeSt.com: In statements announcing the new strategy, there was a lot of talk about logistics customers. Is AMB a latecomer to that market?

Mercer: Not at all. In fact, AMB is a leader in that area. We're not limited to logistics users. While our primary focus has been high-throughput distribution facilities, which are typically located near airports, we're now working with all types of distribution users. The new emphasis is on build-to-suits.

What's happening currently is that there's an abundance of unused space in most markets, which reduces the number of build-to-suits.

GlobeSt.com: Which makes it seem like an odd time to start such a strategy.

Mercer: There will always be build-to-suits for operational reasons, although it's a slower time than, let's say, two years ago. But it's also a slower time than two years from now. We build our strategies on a multi-year horizon, and we fully expect to build millions of square feet of industrial space in the next two years.

GlobeSt.com: You mentioned build-to-suits for operational reasons. Explain.

Mercer: The only reason for a company to do a build-to-suit is to enhance operations in order to enhance financial results. As an example, they might look for a project that provides excess land for trailer parking not found in the existing inventory of buildings.

GlobeSt.com: Prior to forming the new unit, where was AMB's industrial strategy?

Mercer: There was a major emphasis on investment in airport-based industrial. Numerous customers started coming to us asking for build-to-suit assets. We clearly needed to enhance our ability to serve our customers. This also allows us to maximize the value of our land holdings. We had land on our balance sheet--roughly 315 acres across the US--excess land that typically came with the purchase of existing buildings and would be prime for build-to-suit development.

GlobeSt.com: In two years, how much of that undeveloped excess land should see development?

Mercer: Frankly, I don't know. A significant portion, I'd imagine, but at the end of the day, the customer is king in build-to-suit and their chosen locations are where we'll build. The employment of our excess acreage is an ancillary benefit.

GlobeSt.com: In that case can we talk about profit?

Mercer: Many of our peers annually report $10 to $20 million in profit from their development activity, and we believe that we will win our fair share of the business. While build-to-suit profits are low in margin, they are high in internal rates of return.

GlobeSt.com: In terms of internal structure, what will the build-to-suit unit demand?

Mercer: The market is going to take care of internal staffing. While all activity is currently generating from the San Francisco office, we will set up a similar operation in Boston to take care of development on the East Coast. That should be set up within the next couple of years.

GlobeSt.com: Industrial in general has fared relatively well during the recession, although Sept. 11 has added new security pressures. Will that have a negative impact on the growth of the build-to-suit market?

Mercer: Well, the economy had an effect, but not to the extent that it had on office since industrial has a faster development cycle. Office developers need a crystal ball these days. In terms of Sept. 11, new security requirements will actually help our efforts because they will create the need for more inventory within the US.

GlobeSt.com: How about your own crystal ball? How much growth do you foresee by December of this year?

Mercer: By December, my personal goal is to have in the neighborhood of one million sf assigned and under construction. For an industrial developer, that's a long crystal ball.

Email J. Thomas Mercer