As I enter into the last quarter of my term as NAIOP chairman — after many months of visiting chapters and getting to know the association’s diverse membership — Development magazine has asked me some questions about where the industry is headed, what I believe is most important for NAIOP members, and my life in a new hometown. I’m pleased to share my responses with you here.
Development: You just moved to Denver after having lived in Boston your entire life. What do you see as the primary differences between these two markets?
Reilly: The differences in the real estate markets are significant, particularly in the types of distribution space. Boston has, over the years, become more of a local distribution market, as many users serving the region have relocated to nearby New Jersey and eastern Pennsylvania. Denver, on the other hand, has a growing warehouse/distribution market because the metro area is not easily served from other cities.
Development: Prologis does ample development internationally. How is what you’re doing in Brazil affecting development here in the U.S.? Which is more leading edge?
Reilly: In some cases, emerging logistics real estate markets can actually be more forward thinking in terms of design specifications. In Brazil, for example, standard clear height for new speculative product is 12 meters, or just over 39 feet. Because the vast majority of new customer demand involves relocations from old, obsolete facilities, users are purchasing new racking and material handling equipment and prefer to take advantage of as much efficiency as possible. Otherwise, we generally are seeing the same types of requirements, particularly for online retailers, globally: more car parking, more trailer storage, bigger floorplates.
Development: Which industrial markets are hot right now? What’s driving the growth?
Reilly: Many U.S. markets are doing well, but I’ll pick two. The Inland Empire of Los Angeles is fortunate to have multiple drivers of demand: It services the largest port complex in the Americas, has one of the largest regional populations in the U.S., and the homebuilding market is firing up again. Dallas — indeed, the whole state of Texas, for that matter — is a massive job-creating engine at the moment. It’s business friendly with a very low tax rate environment, has a low cost of living and, of course, is blessed with significant energy reserves. All of those elements, combined, create a great real estate market environment.
Development: What impact do you think tax reform will have on commercial real estate?
Reilly: Positive tax reform — simplification of the code and reduction in marginal business and personal tax rates — will be a huge positive for job growth and, therefore, commercial real estate. Negative reform — higher marginal rates or structural changes such as changing REIT guidelines — would be harmful.
Development: What can NAIOP do to prepare its members for the next wave or upswing in commercial real estate?
Reilly: Our business is in a constant state of change, and the rate of change is accelerating. Relevant research and education are becoming more important every day, and NAIOP members are fortunate to have immediate access to some of the industry’s best thought leaders and research studies.
Getting to Know Gene
Last book read?
The Unforgiving Minute: A Soldier’s Education, by Craig M. Mullaney
Preferred vacation spot?
Favorite out-of-the-office activity?
iPhone, Droid, or Blackberry?
Best thing about your new hometown?
Its close proximity to my favorite vacation spot and activity!