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SIOR Panel Details How to Thrive in “the New Abnormal”

“It’s been an amazing run for industrial,” said Roy Splansky, SIOR, principal with Venture One, during a recent panel at SIOR’s Spring 2023 Event in Montreal, titled “Thriving in the New Abnormal.” The markets are “fundamentally still very strong, still at almost record occupancy,” he continued, “and there’s still activity. But there are signs on the horizon.”

Splansky cited 3M’s recent announcement of layoffs as one such sign, and it harkened back to 3M’s response to market conditions 15 years ago. He recalled that in early 2008, when “people were still feeling pretty good,” the maker of Scotch Tape canceled a one-million-square-foot industrial project Venture One was developing for it. “When you see big companies like that starting to slow down, lay people off, that will have repercussions,” he said.

Moderator Hagood Morrison, SIOR, executive vice president at Bridge Commercial, set the stage in his opening remarks, citing data he’d picked up in the days prior to the panel. According to Cushman & Wakefield, transaction volume for new industrial leases is down 40% from a year ago. “According to S&P, U.S. bankruptcies are up over twice as much as this month last year,” he said.

“According to the Wall Street Journal,” Morrison continued, “industrial building values are down 12% over last year,” while office values are down 25%. And Morgan Stanley reported that commercial real estate debt maturities total $2.5 trillion over the next year, “much higher than the previous five years.”

Nonetheless, Morrison didn’t see many hands going up when he asked whether audience members were feeling depressed over current circumstances. “It is nice to see people feeling optimistic,” said Splansky.

He added that Chicago-based Venture One remains acquisitive and is currently raising its sixth fund. “In development right now, we’re seeing a lot of activity from users that want to own,” he said. “We have land holdings, we’re willing to sell them our land, and they’ll hire us to build the building. A lot of that is in the manufacturing arena, not necessarily large-scale distribution.”

A real estate finance lead at a prominent lender said that when it comes to deal volume, “the biggest issue is the volatility in the market… Once we get some sort of calmness for more than the 30-, 45-, 60-day period, that’s when things start to change. It’s the bid-to-ask ratio that’s really off, where people aren’t transacting because they’re saying, ‘well, in 30 days it could be better.’ No one knows.”

On the leasing side, Michael Maroon, SIOR, an industrial specialist with Acclaim Group, concurred that getting deals done is more complicated at present compared to a year ago. “If we’re representing an industrial tenant and they need to do something in the near term, they require a lot of thought and work because landlords lag in coming to reality when markets level or go down, and they lead ahead of markets in pricing,” he said.

Conversely, Maroon said, “If you’re a longer-term tenant and you have a little time—you’re a year and a half out, two years out—I think by then most landlords will come to reality. Rates aren’t going to plunge, in my opinion.” He predicted that new construction already underway will get completed, while “the stuff that’s proposed will probably sit, waiting for the perfect fit for a long-term tenant.”

And with the market currently at an inflection point, “I think the tenants need us more than ever,” said Maroon. “If you’re a senior practitioner and you have the ability to speak with the C-suite, the CEOs and CFOs, those people really need the advice right now on where to go. It’s not just ‘keep paying the bigger number’ as though that’s your only choice. That’s tired, that’s old and it’s not necessarily going to be the case going forward.”


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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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