I attended the Colorado Real Estate Journal Industrial Owners & Managers Conference & Expo on Wednesday, September 15, 2010.
There were several panels discussing various elements of the industrial real estate market in the Colorado Front Range.
- The investment panel seemed to reach a consensus that new industrial development would not occur until the third or fourth quarter of 2011.
- They also noted that larger industrial properties are owned by public REITs, for which cash flow is important. Some of those companies seem to be leasing for very low rates in order to maintain occupancy and cover operating expenses.
- Ned White of Intergroup Architects led the engineering and design panel and noted that construction technology has improved so much that there is not a big difference between a fairly standard efficient building and a LEED certified building, except that the LEED certified building requires $50,000 to $75,000 additional cost (regardless of the size of the building) in order to process the paperwork to obtain the certification.
- This same panel also noted that there is significant risk in the market of subcontractors defaulting during projects, resulting in delays and cost increases. They suggested negotiating a final construction price with a pre-selected general contractor in order to balance price and strength of subcontractors, rather than using a “hard bid” approach to select a general contractor.
- Two attorneys from our office, Tom Macdonald and Bill Kyriagis, spoke on legal aspects of medical marijuana facilities. In summary, it is still against federal law to possess or sell marijuana, but the Justice Department has issued a memorandum that prosecution of owners or operators of medical marijuana facilities will not be a priority if the owners or operators comply with state and local law. However, there is still a possibility that the property used for the medical marijuana facility could be subject to the broad federal forfeiture statute. This is especially troublesome if the Justice Department’s priorities were to change.
There are still some challenges in the industrial market with lack of financing, low rents and relatively high construction costs. It appears these could be in place for the next year or so.
Photo by mrshife (flickr)