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ADISA Video: Investing in Modern Industrial Real Estate

In a video interview with Damon Elder, publisher of The DI Wire, and as part of ADISA’s Focus on Alternatives Series, Michael Glimcher discusses modern industrial real estate and why it continues to be a compelling space for investors.

Glimcher, managing director at BGO, defines what modern industrial real estate is today vs. pre-2000, the trends that are driving industrial real estate’s performance, and the opportunities in the space looking forward.

When people think of industrial real estate, according to Glimcher and Elder, they may think of dusty warehouses or smoke-spewing manufacturing facilities, but industrial real estate has changed dramatically in recent years. Everything we order online passes through industrial real estate.

As shared in the video, modern industrial real estate is essential to today’s economy and so building attributes reflect that. Modern buildings have different roofs, column spacing, and building heights than its predecessors to accommodate robotics and the ways goods are stored and moved today.

Although vacancies have ticked up to 4.7%, industrial real estate was and still is the No. 1 performing category within real estate. Glimcher shares his predictions for the future.

“Demand will continue to increase. The supply will come down because there won’t be new space, and that space should get absorbed, and we should get back to normal sort of 3% vacancy or so,” said Glimcher.

Video Transcript

 Damon Elder  00:09

Welcome to another edition of focus on alternatives brought to you by ADISA, the Alternative and Direct Investment Securities Association. I’m Damon Elder, publisher of The DI Today I’m joined by Michael Glimcher, from Bentall Green Oak or BGO, thanks for joining us, Michael.

Michael Glimcher  00:23

Thanks so much, Damon.

Damon Elder  00:24

So, Bentall Green Oak is a massive global institutional investment player, 80 some odd billion in assets under management, diversified in all kinds of asset classes. But the asset class I want to talk about today is kind of the redheaded stepchild I think compared to the old standards of office and retail and whatnot. But historically it’s done great and that’s industrial asset class. I know that’s something that BGO also invests in, so let’s drill down into industrial. I don’t think it gets a lot of attention and it probably should. So, let’s start with the basics for our viewers, what exactly constitutes industrial real estate?

Michael Glimcher  00:59

Great question Damon, and I’ll tell you know we’re very committed to industrial at BGO, we have about $83 billion of assets under management, roughly 1/3 of them are in industrial so something we’re very committed to. What’s industrial real estate? It’s a warehouse it’s a logistic building when you drive by these big buildings on the side of the road you see trucks moving goods all over the country that’s an industrial building, it’s just a big box.

Damon Elder  01:22

So yeah, I think many of our viewers, lots of people when they think of industrial, they think of dusty old warehouses, you know smoke spewing manufacturing facilities. But in recent years I’ve started to hear and I’m sure most folks have heard this as well, modern industrial. So, what differentiates the two, what is modern industrial?

Michael Glimcher  01:41

So, you were talking a little bit about warehouses, and warehousing, industrial buildings as well as manufacturing, there is some manufacturing that goes on within these buildings but it’s generally what we call light manufacturing. So, it’s really assembling or putting things together it’s not what we would call historically dirty manufacturing, that sort of thing. And modern what’s modern, what do we mean by a modern building? We usually draw a line at the year 2000, but it’s not necessarily a year it’s really the attribute of the building has. So, what is the column spacing how tall is it? Typically, these buildings used to be only 24 feet high, now they’re about 36 feet high. When you think about it and you think about how things can be stacked and how robotics work today, you can fit 50% more goods in the same footprint of a building that’s a lot more efficient and that makes a lot more sense. And then also, how do you load and unload the building and how do how do things function from within the building as well as having a white roof which is much better from a sun absorption standpoint. So, you know we think about these as modern buildings that are good for today but are also good for the future.

Damon Elder  02:42

Gotcha. Yeah, I’d assume that the requirements of your tenants’ industrial tenants, have changed dramatically just in the last 25 years.

Michael Glimcher  02:51

It’s just amazing when you when you think about what goes on in these buildings, you think about ecommerce for example, and how and how many people want to have their products here on shore. The interest in this industrial space has been unbelievably strong because people realize if it’s not here if it’s stuck on a boat somewhere and it’s not coming over you can’t sell it. And typically, from a cost structure standpoint less than 5% of the cost structures in their building, so they can afford to have a little more space and so that makes a lot of sense. But it’s not again it’s not just ecommerce it’s manufacturing its distribution it’s movers it’s any anything you think about that maybe an easy way to think about it this the clothes you where the car you drive the food you eat it generally moves through industrial real estate. It our view it’s essential to our economy.

Damon Elder  03:38

Yeah, I mean I think everyone obviously was impacted from the pandemic or during the pandemic and even after the pandemic started to die down a bit, by the supply chain issues you know is impacting the entire globe, you know.

Michael Glimcher  03:49

There’s no question about it, and I think what a lot of people realize you know, if you were selling sneakers and you’re waiting them for them to come from overseas you weren’t selling those same sneakers. I think people realize I’d rather have another warehouse full of them the opportunity cost is not lost. And you know you said what are these buildings. I think a lot of people think they were sitting at home they were buying things from the cloud. Well, I don’t know about you, but I didn’t sit in my in my house and see things come out of the cloud, I saw things come out of a truck that came out of one of these buildings. So, everything you ordered online passed through industrial real estate it really does touch all of our lives even if we don’t know it.

Damon Elder  04:23

So, among the institution for the investor class industrial assets have been very popular for a pretty long time, but again maybe not widely distributed. But certainly, they they’ve had people who have really appreciated the industrial asset class. In recent quarters you know obviously there’s been some shifting around in the real estate world, it’s not industrial has not been unaffected. I think Cushman and Wakefield just brought out their most recent quarterly update for the third quarter and it showed that for, yet another quarter industrial vacancy has gone up I think 70 bips to about 4.7% as of the close of the third quarter. So, with them you know there’s been a record amount of new construction in recent years, a lot of those assets are coming to market now. Interest rates are obviously did a 10 year high. What’s going on in the industrial space, is it’s still a compelling space for investors what are the long-term headwinds or tailwinds?

Michael Glimcher  05:20

It’s interesting the last handful of years it’s been the number one performing category within real estate. You look out the next five years consensus as it will be again. Yes, vacancies ticked up a little bit, but it’s very little, and it’s the lowest vacancy in any other sector of real estate, so comparatively it’s still the best. What else has happened is you talked about interest rates. Interest rates are up, it’s more difficult to get financing. So, I think you’re going to see this next development cycle a lot less space coming online. As far as we’re concerned the demand has not come down at all the demand will continue to increase the supply will come down because there won’t be new space and that space should get absorbed and we should get back to normal sort of 3% vacancy or so.

Damon Elder  06:01

Which I mean again any other asset class would probably low 5% vacancy right I mean. So, I mean at 4.7 industrial still awfully strong. What are the trends that are driving this long-term movement and high performance for industrial?

Michael Glimcher  06:16

I think it again it’s a lot about these modern buildings, I think some of the older buildings have become obsolete. These shorter buildings, these buildings with lesser column spacing. Buildings frankly it’s it may seem very simple but if you don’t have an even floor the robots don’t move very well and so you need a perfectly forward even for in an in a new building. So, I think a lot of people are looking to move into new buildings. But what’s interesting is the old buildings are still absorbed because there is not enough supply out there. Over time we believe the older buildings could become obsolete and that’s why we focus on modern but so far, they haven’t even become obsolete.

Damon Elder  06:50

Gotcha, gotcha. So, what are the potential hazards from the industrial space? What from a macroeconomic perspective could really impact the space and make it less you know less attractive from an investor’s perspective?

Michael Glimcher  07:05

You know if our economy just came to a halt, if people weren’t buying things, if goods were not being moved around the country, if people were you know eating less buying fewer cars buying less clothing. So, if there was a major major slowdown in the economy, that could affect us. But there’s also some of the other things like I said the white manufacturing moving there’s other things that happen within these buildings. So, you know a major slowdown in the economy would affect the industry no question about it.

Damon Elder  07:32

Like every other industry.

Michael Glimcher  07:33

Like every other industry though, so.

Damon Elder  07:35

What about labor, I mean obviously latest labor report just came out strong, strong hiring we’re at a full employment according to the economists 3 point something percent unemployment. How is the labor market our current labor market impacting industrial and the use of the industrial spaces?

Michael Glimcher  07:53

It’s really interesting that you say that because second to transportation costs labor cost is really the next big expense that people have who operated an industrial, not rent. And when we look at industrial, one of the things we like to study is, what is the blue-collar labor force within that market? What is it what is that labor force being paid? What is the availability of that labor force? Sometimes it’s not even how much you’re having to pay, but is there is there availability within the market. And we’ll sometimes you’ll say you’ll see a market where everything is concentrated in one area and then we bought a little left or a little right of that. Why did we do that, because we saw there was a better pool of Labor and maybe the people who were driving to get to the other industrial buildings or driving right by the site and we can be closer to their home, and more likely get that way before so that’s a factor we look at very intently with everything that we build as well as everything we buy.

Damon Elder  08:44

So, sticking to labor just a second, so we you touched on earlier that there’s a lot more automation and robotics and things of that nature coming to these modern industrial buildings. How does your analysis of the local labor pool change as a result of that, I mean is it going from a different kind of blue collar to maybe more of the gray collar kind of worker?

Michael Glimcher  09:03

You know it really depends on what industry you’re talking about, and certainly automation has helped. It has it has shrunk our parking down we have fewer people working in a lot of these buildings. But there are still a lot of people working in these buildings that in specifically in in a building that’s an industrial building that say is different than a data center where there’s maybe two people working there. But we certainly have fewer parks and so our fewer parking within these parks so that is a factor as well.

Damon Elder  09:31

And I would assume the power needs that’s something you got taken into consideration with the modern too, they must be utilizing more power I mean the solar become a big part of your analysis?

Michael Glimcher  09:40

 Solar something that we as a company are looking at it. We think it’s something that could be very important. There’s not a better type building, if you think about it’s a big rectangle you can put a lot of solar panels on the roof and you can provide power for the building. Obviously, it depends on the legislation it depends on, it’s expensive to do solar and we certainly need we need government help to really make it work but we think for the future industrial buildings or maybe one of the best if not the best category for solar roof.

Damon Elder  10:08

Like you said, it makes sense this big giant flat building right. So, what are some of the unique advantages and on the flip side disadvantages from an investment perspective when it comes to industrial real estate?

Michael Glimcher  10:20

You know industrial buildings there; we use the term they’re kind of chunky you know they’re big buildings they’re big investments. So, it’s really you know generally you see an institutional investor because they’re just so big and the and the check amount is a lot. That that’s kind of a hard thing from an investment standpoint. You also they’re kind of like big triple net at leases, and that that’s great because all the expenses get passed through. But you do have big leases and you have big exposures to tenants, so you want to have you want to have a diversified portfolio you want to have a number of tenants within your portfolio that that that would be something I would consider. Those are things that can be advantages as well as disadvantages. One thing I really love about industrial is the building that you need for your business the building I need for my business is generally the same building, that’s not the case for an office it’s not the case for your home it’s not a case for a hotel you know it retail stores they do very specific things. Generally, it’s just a matter of how many square feet do you need, how much clear height do you need and then the building is the building. And that’s something I really like about it and that if we turn over a tenant the TIs are very low the tenant improvement dollars are very low, because the same building that worked for one company will also work for the next company.

Damon Elder  11:30

Whenever I discuss real estate real estate investment folks, you know I was harking back to the age-old adage of location location. So, what kind of geographic factors do you have to take in mind when you’re sourcing an industrial building for investment?

Michael Glimcher  11:45

We think about proximity to the end user, and you know it’s not just it’s not just where are the people located, maybe if you were building a hotel or your buddy retail you want to be right where the people are. We want to be in proximity to many people. So, we look at what is what are the drive time? What are the road systems? What’s the access to the road system? Those are the kind of things that would, you think about. All these trucks moving in and out and how do they get there and how do they navigate the terrain that that’s the kind of thing we think of.

Damon Elder  12:12

So, I think it’s safe to say based on our discussion that you’re bullish on industrial short-term midterm long term is that fair to say?

Michael Glimcher  12:20


Damon Elder  12:21

Ok. So, Michael obviously as we discussed earlier, some headwinds coming you seem to think they’re short term has a lot to do with just a lot of new product that’s coming to market that’s going to get absorbed and we’ll get back to 97% occupancy nationwide etcetera etcetera. So, my takeaway is you’re bullish on industrial, but I don’t want to put words in your mouth what’s so great about industrial where are we going?

Michael Glimcher  12:42

We think it’s great because it’s essential. And you know how many offices will people have? We don’t know. What is the future, how many how many hotel stays will people have? We don’t know. We do know that our economy is powered through logistics through industrial and to get the goods that we need to get the jacket you’re wearing, to get the food that you’re eating, the car you’re driving we need these buildings. So, to me it’s an essential category.

Damon Elder  13:07

Well Michael, like I said industrial has been a great asset class for a long time, and I think there probably hasn’t been enough attention paid to it, so I want to thank you so much for sharing your insights on industrial real estate.

And thank you so much for joining us for another episode of focus on alternatives brought to you by ADISA. For more information on alternative investing always visit and for your Daily News on alternatives of course visit Thanks so much.

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