Industrial Opportunities for Smaller Entrepreneurial Developers

Fall 2013
Kim Snyder (above, with fellow panelist Joseph Trinkle) and John Magness (below) spoke about the challenges facing smaller entrepreneurial developers during an I.con session titled “Dissecting the Current Industrial Development Cycle.”
head shot of John Magness

Have big institutions, global commercial real estate players, tight lending restrictions, and a crushing recession pushed small, entrepreneurial developers out of the business? I.con panelists conceded, during a session titled “Dissecting the Current Industrial Development Cycle,” that it is becoming more difficult for smaller developers to make deals in many markets.

Paul Earnhart, senior vice president, Lee & Associates, said that the commercial real estate development business has morphed into a global business with global players. John Magness, senior vice president and director with Hillwood Investment Properties’ West Coast office, concurred, stating that “the number of true developers — the people who will go out and buy land and take that risk, go through entitlements, go through construction, and spec[ulatively put up] a building — has shrunken considerably.” Finally, Kim Snyder, president, Southwest Region, Prologis, said that it is becoming increasingly difficult for a small developer to buy or option two or three pieces of property and put up $500,000 deposits on each to hold those properties while securing equity or debt financing and actually constructing a building. “Do two or three of those,” he warned, “and anybody’s checkbook will become depleted.”

Snyder added, however, that there always will be special projects that are perfect for the small developer: “There are always those unique transactions that one person can do with a couple of associates. These are not high-volume or high-leverage type projects; instead, they are the 100,000-square-foot rehab, infill project where it is possible to make $20 or $30 per square foot. I think that business is going to be there,” he concluded.