Presentation - Indiana Logistics

Presentation - Indiana Logistics

The State of the U.S. LogisticsMarketRene Circ

Economic Backdrop

Economic Backdrop2011 was supposed to be a good year• GDP was to grow near 4 percent• Equities were to rise another 10 percent• Unemployment was supposed to start declining… instead …• GDP growth is too low to write down• The stock market is too stressful to think about• Employment situation is too depressing to discuss4

Economic Backdrop• Rising oil, gas and diesel prices were the first shockSource: U.S. Energy Information Administration5

Economic Backdrop• The earthquake and tsunami in Japan were the second shockSendai port6

Economic Backdrop• Potential defaultsof Spain, Portugal,Ireland and Italy, inaddition to Greece,were the thirdshock7

Economic Backdrop• Domestic political gridlock and inability to demonstrate a clear pathtowards fiscal responsibility were the fourth shock8

U.S. Logistics Real Estate Market

U.S. Logistics Real Estate MarketQuick definitionsNational industrial market~25 billion sq. ft.Top 50 markets~13 billion sq. ft.U.S. logistics market~4 billion sq. ft.10

U.S. Logistics Real Estate MarketQuick listTOP U.S. Logistics Markets(millions of square feet)Southern California 555Chicago 431Ohio 367Atlanta 325Dallas 265Northern New Jersey 231Central Pennsylvania 165Houston 153Memphis 133Indianapolis 100Baltimore 96St. Louis 91Kansas City 87Seattle 79Oakland/East Bay 76Detroit 73Source: Grubb & Ellis Research11

U.S. Logistics Real Estate MarketThe market has been a strong performer for a decade• Demand• Minimal negative net absorption during therecession• New high of total occupied square feet was reachedwithin 1 year of the downturn• By q4 2010, demand was running close to prerecessionlevels• Class A logistics buildings never saw negativedemand12

U.S. Logistics Real Estate MarketThe market has been a strong performer for a decade• Supply• Developers love to build logistics buildings• Since 2005, 60 percent of new supply was logisticsbuildings• Share increased during the recession13

U.S. Logistics Real Estate MarketLogistics buildings do not outperform in every aspect• Vacancy• Always higher than overall industrial16.0%12.0%8.0%4.0%05 07 09 11Total Industrial VacancySource: Grubb & Ellis ResearchLogistics Vacancy14

U.S. Logistics Real Estate MarketLogistics buildings do not outperform in every aspect• Rent• Rent declines were in some instances even moresevere in logistics buildings$4.50Asking Net Rent$4.25$4.00$3.75$3.50'04 '06 '08 '10Source: Grubb & Ellis Research15

Seaport Markets

Seaport Markets• Demand drivers have shifted from local to global in lastdecade• Best example: Ports of LA/LB and Inland Empire2,000,000U.S. Import TEUs1,600,0001,200,000800,000January April July October2009 2010 2011Source: Zepol17

Seaport MarketsU.S. seaport markets tend to outperform• Top 12 account for ~1.4 billion square feet• Lower vacancy – 9.6%• Stronger demand – 62% of total (YTD)• Stronger rent growth – 2.7% (YTD)18

Seaport MarketsQuick Peak (Port / Logistics Market Ranking)Southern California (1/1) Houston (7/8)Northern New Jersey (2/6) Charleston (8/22)Seattle/Tacoma (3/14) Miami (9/18)Savannah (4/21) Baltimore (10/11)Oakland (5/15) Philadelphia (11/17)Norfolk (6/19) Portland (12/20)19

Intermodal Markets

Intermodal Markets• Containerized imports have become drivers of inlandmarkets as well• Best example: Chicago and CenterPoint intermodal yards250,000Intermodal Rail Activity230,000210,000190,000170,000January April July October2009 2010 2011Source: IANA21

Intermodal MarketsU.S. inland markets tend to underperform• Top 8 account for ~2 billion square feet• Higher vacancy – 13.3%• Weaker demand – 10% of total (YTD)• Negative rent growth – (0.5)% (YTD)22

Intermodal MarketsQuick Peak (YTD Demand / Vacancy)Chicago (+ / 13.3%) Central PA (+ / 12.1%)Ohio (- / 13.1%) Memphis (+ / 14.2%)Atlanta (+ / 14.6%) St. Louis (- / 11.7%)Dallas (+ / 14.4%) Kansas City (- / 6.3%)Indianapolis (+ / 7.3%)23


Outlook• The economy – another recession is 50/50• The logistics market• Recession can be good for this sector• Supply pipeline is leaner than it ever was• New opportunities – Panama Canal, rising oil prices,near-shoring• Expect continued positive performance25

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