When Do You Have the Discipline to Stop?

LOS ANGELES—Panelists on the “Sports Talk Radio” panel—which served as a replacement to the CEO Power Panel—at NAIOP‘s I.CON conference this week had an overwhelmingly positive view of the industrial market, with cap rates compressing and rental rates increasing. (NAIOP is a GlobeSt.com Thought Leader.) However, panelist Jeffrey Phelan, president of DCT Industrial, said, “The bigger question is when do you have the discipline to stop and let the market correct itself? And, how do we do that and when do we do that?” The other panelists, Jim McShane, CEO of McShane Cos.; Carl Panattoni, chairman of Panattoni Development Co.; and Gene Reilly, CEO for the Americas at Prologis, agreed that it was an important question—but didn’t have an answer.

The panel looked closely at industrial markets across the country. Panattoni said that land prices in the San Francisco Bay area, a tight market “governed by the tech space,” are approaching $35 per square foot and that most of the older industrial product is getting converted into lofts. “It is a special spot if you can find a way to play,” he said. However, he also noted that the project analysis is distorted because there is so much money that is chasing product. As a result, speculative building is higher than ever. “These things can change in a hurry,” he warned. “But at the moment, everything looks like it is hitting on all cylinders.”