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DCT Industrial Looks to Development for Growth

06/20/2013 | By Carisa Chappell

Phil Hawkins, CEO of DCT Industrial Trust Inc. (NYSE: DCT), joined REIT.com for a CEO Spotlight video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

The Denver-based REIT specializes in bulk distribution warehouses and light industrial buildings in the United States and Mexico. Hawkins said DCT Industrial Trust had a good first quarter and offered his views on how things are shaping up for the second half of the year.

“We’ve had several good quarters now. I think it reflects a continued recovery in the industrial market. Rents and occupancies are up in the markets, and our company did well on a rent and occupancy perspective,“ he said.

Hawkins said he is optimistic about the broader economy ashis customers continue to make decisions and lease space.

“Vacancies are dwindling. Supply is in check. As a result, rents are moving, and rents are the next step in the recovery,” he said.

When it comes to future external growth, Hawkins said he is leaning more towards development and taking “value-added risks.” He added that DCT has a competitive advantage relative to more passive institutional investors.

“Clearly, we’re going to continue to look for acquisitions, and we’ll find them, I’m sure,” he said. “But for the most part, generally speaking, I think the opportunity is in development.”

As fundamentals continue to move in the right direction, Hawkins said one of the challenges for the sector involves supply-and-demand dynamics. He expressed interest in lenders’ views on funding new construction.

“So far, and I think for a number of reasons it will remain this way, speculative construction and development has been funded by equity. So, either REITs or also private investors, primarily pension funds and non-traded REITs, have been providing equity capital to private developers,” Hawkins said.

That instills discipline in the market and is very different than a private developer that is borrowing money, according to Hawkins. If the banks loosen their lending standards and begin making loans on speculative construction, Hawkins said that could pose a risk to the sector.

“Demand comes from the economy. I continue to be optimistic that the economy will continue a slow recovery and a slow recovery for our business is not a bad thing,” he said.