Welcome to Industrial Opportunities with Nic DeAngelo
On the latest episode of The Real Estate Express podcast, host Victor Menasce had an engaging conversation with Nic DeAngelo, discussing the opportunities and trends in the industrial real estate sector.
Nic’s Background and Career Journey
Nic began his journey early in real estate, deviating from the average path by working directly for family offices. His invaluable experiences allowed him to learn from seasoned professionals and create a significant impact in his career development. Eventually, Nic joined Saint Investment Group, and presently, they have more than 200 million in assets under their management.
Industrial Real Estate: Is it Overheated?
From Menasce’s perspective, the industrial sector appears overheated, with an increase in completions, an abundance of products in the pipeline, and inconsistent absorption. He advised investors to look for opportunities in select locales rather than focusing on the market as a whole. Nic agrees with this perspective, claiming that while the industrial sector is his favorite asset class and Saint Investment Group has heavily invested in the sector in recent years, they are currently pencils down due to the overheated market.
The firm’s focus areas are southern California and the Texas Triangle region, due to the ports, proximity to Mexico, and North American manufacturing opportunities. Despite these favorable factors, concerns remain about zoning confusion, stalled markets, and the reluctance of some cities to invest in industrial development. Yet, Nic remains optimistic for opportunities in the coming five years.
Existing vs New Development
The conversation shifts to discuss the choice between buying existing properties or developing new ones. The discussion encompasses building obsolescence, potential multicasting, remoteness of facilities, and dependencies on single tenants. Reflecting on their strategy, Nic shared that they focus on buying off-market properties at comfortable pricing and timing, yet with consideration for numerous market indicators.
Key Market Observations
Particular attention is given to market indicators, such as absorption rates, leasing, and vacancy rates. Industrial real estate, being primarily dependent on single tenants, is affected greatly by these aspects. It was noted that smaller, institutional buyers were often outbid due to their need to accrue capital and disregard for fine return details. However, Menasce stated that overall, though vacancies increase in larger buildings, tenants prefer buildings all to themselves – making 50,000 to 100,000-square-foot facilities attractive.
The Impact of Geopolitics
The conversation touched on significant geopolitical factors affecting real estate, particularly the use of liquefied natural gas (LNG) for shipping. Menasce elaborated on the fact that 20% of new ships are now powered by LNG, which is cheaper and highly available, prompting considerations for how this might alter trade routes and impact warehousing.
DeAngelo provided the analysis that while any energy-related cost reduction will have an impact on the costs of goods, it may not solve all problems, particularly in countries like China. He also pointed out the potential benefits for neighboring countries and the possible influence on international manufacturing.
Assessing Business Creditworthiness
Discussing business creditworthiness, Nic indicated that their method involves a thorough vetting process of potential buyers and determining the real value of the property. They also minimize risk, by limiting their involvement in less attractive industrial areas and focusing instead on institutions with regional or national credit.
If you’d like to learn more, Nic invites you to visit Saintinvestment.com/resources to access free educational resources, including economic spreadsheets, market metrics, and information-packed webinars.