Bruce Duncan, president and CEO of First Industrial Realty Trust (NYSE: FR), joined REIT.com for a CEO Spotlight video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.
First Industrial Realty Trust owns and operates close to 70 million square feet of industrial real estate in markets across North America. Duncan offered his views on how a recovering economy is affecting fundamentals in the industrial sector.
“As the economy improves, you need industrial facilities to be able to distribute and assemble more goods,” he said. “Our business is doing pretty well. For the last 11 quarters, there’s been absorption in the industrial market. Personally, for First Industrial, since the first quarter of 2010, we gained 820 basis points in occupancy.”
Additionally, he discussed the company’s plans for new development.
Pricing for quality acquisitions are starting to become deflated, according to Duncan. He noted that he’s been disappointed that the company hasn’t been able to buy properties at prices that made sense.
“There’s so much demand and capital coming into the marketplace. In good markets your cap rates are in the mid 5 to low 5 percent to buy. So, we are doing more in the development area,” he said. “We feel good about our development. We are getting a 100 to 200 basis points yield ahead of what we’d buy it for, and it’s improving the quality of the portfolio.”
Duncan said First Industrial has a good pipeline for development going forward. In the third quarter, the company is going to start on a 555,000 square-foot-development in the Inland Empire area adjacent to a 692,000-square-foot property the company developed last year.
“We just assembled, by buying from different sellers, a site that could accommodate about 1,370,000 square feet of development that will start in the third or fourth quarter of next year if everything goes right,” he said. “Then, we have a site in Houston for 350,000 square feet that we’ll start next year and we’ve got sites in Pennsylvania, Dallas and Nashville, and California. The nice thing is we’ve got built-in internal growth.”