“We’re targeting multi-tenant boxes,” he said. “We don’t want a portfolio with large, single-user spaces.”

The bottom line, he said, is “there are a limited number of markets where you can make the numbers work for spec development. The merchant building phase in the public markets is probably over for a long time to come.”

In fact, although reconfiguration will continue, things are slowing down across the board, Wattles said. “Even the small guys are asking for cancellation options,” he added. “Rents are real tough and so far from replacement costs; it’s mind-boggling.”

The panelists pointed out that demands for industrial space are coming from retailers. During the depths of the downturn 36 months ago, “we did a lot of deals for food and beer distribution and manufacturing facilities,” said Mullen. Today, it’s the retailers, such as Ace Hardware, Wal-Mart, Home Depot and U-Line. “The key to these businesses’ success is they offer customers overnight or two-day service. Being next to a logistics hub is very important.”

Consumer products are very active, Wattles concurred. “Occasionally, we see manufacturing deals; and third-party logistics companies are active, too,” he said. “Xcel Logistics will sign dramatically more contracts this year versus the prior year, though we’ll see how that’ll translate into absorption.”

Logistics also plays into the growth in e-commerce companies, such as Amazon. Riley asked the panelists if this represented a paradigm shift or structural change in the market, or whether it was just a phase. Mullen noted that e-commerce is a definite demand driver. “It’s the future,” he said.

But Wattles believes “it’s a very bifurcated market. You’ll see a lot of net square footage built, and e-commerce will take a greater share of the retail business going forward.”

On the other hand, there’s still a place for traditional real estate. “Twenty years ago people said brick-and-mortar retail would disappear because of Internet sales, and bank branches would be eliminated due to ATMs, “Wattles said. “Both of those are still around. I’d just be in the business of trying to build the right size facilities in the right markets with the right metrics, no matter what.”

One thing the industry shouldn’t bank on, Mullen said, is the Panama Canal expansion, which is getting a lot of attention from industry observers since it’s expected to change the industrial landscape as more goods come to the East Coast. “I don’t see a huge change,” he contended. “The Canal is widening, but ships are also getting bigger. The bigger ships are always going to land on the West Coast.”

The Canal is also unlikely to make as much financial sense as it would seem. “The toll for a ship to go through the Canal now is $250,000 each way, so that’s $500,000, round trip,” Mullen pointed out. “After the expansion opens, that toll will probably rise, let’s say, to $750,000, round trip. I look at that, and think that the railroads make more sense as a value proposition.”

What is making sense, though, is holding onto assets, despite the demand for them. The investment market is strong, especially with foreign money seeking a safe haven in US real estate. “We wouldn’t have any problem selling assets, but we aren’t selling them because we need them,” Mullen said.

In fact, he revealed that CenterPoint’s parent company (CalEast Global Logistics, a JV of the California Public Employees Retirement System and GI Partners) is under-allocated to real estate. Their goal is to put $12 billion into real estate, representing up to $23 billion to $24 billion, with leverage, in total investment. Some of that money, Mullen said, will go toward CenterPoint.

Whereas his firm’s prior investment strategy was to buy and flip, Mullen said, “the world has changed. Now it’s a long-term hold for income. We’re very aware of our cost of capital, and our potential partners also want to buy and hold.”

It’s a different story for DCT, which focuses on 12 or 13 markets across the US. “We’re sensitive to replacement cost when entering a deal,” Wattles explained. “For us, it’s impossible to compete on the pristine, core portfolios because we’re not comfortable with the long-term hold at the today’s prices per square foot.”

The firm’s portfolio, he noted, is 70% value-add. “It’s very hard to get money for value-add,” Wattles said, adding that even though debt is generally available, capital sources are only financing core, stable assets. “Our source of capital, absent a joint venture, is asset sales.”

Overall, he continued, “The public sector is overleveraged. I think you’re going to see REITs generally be less active in acquisitions, given their share prices today.”

It’s a different world today for real estate. “The US was in a much better place 10 years ago,” Wattles commented. “We, as an industry, are a capital-intensive service business to businesses operating in the US. If they do well, we do well. But it’s unclear what the catalyst to that market is going to be.”

Mullen agreed, but said he’s also worried about the political situation in the US. “The bipartisan bickering…is disheartening,” he shared. “I just want these guys to care about this country. As a country, we seem to be stymied in quicksand.”

Later in the day, CenterPoint was awarded NAIOP’s Developer of the Year award, presented to Mullen by Mike Alter of the Alter Group, last year’s winner. The award is given to a development firm for its industry leadership, support of NAIOP and active support of its community. That was followed by a keynote address by political strategist and author Karl Rove, who shared his thoughts on the state of affairs in Washington, DC and the US economy, and provided his outlook for the 2012 election.