Real Estate Development on a Patient Path

Chris Caton, Prologis

In the latest episode of the NAREIT Podcast, Chris Caton, senior vice president for research with industrial REIT Prologis (NYSE: PLD), shared the latest findings from research regarding development activity.

A recent Prologis research report outlined five new trends shaping real estate development. While the severe recession of the late 2000s should naturally lead to more demand for space, new supply has been "measured," according to Caton.

Consolidation and institutionalization of real estate is influencing development in multiple sectors, Caton said. There are fewer, larger players in the business, he said.

Additionally, more companies and developers are showing less tolerance for risk, according to Caton.

"The global financial crisis is certainly casting a long shadow," he said. "That's shaping the amount of risk and the types of risk that the players in the space want to take or are willing to take."

New lending constraints are also affecting trends in development. These include the regulations resulting from Basel III. Additionally, lenders are showing a preference for working with larger companies.

Caton also pointed out that real estate companies are now drawing from a "tighter talent pool."

"As we look over the last 25 years, there have been more years of very little development than years of active development," he said. "That has led the talent in the real estate pool to pursue other options."

Lastly, potential developers have access to higher-quality information, according to Caton. "That helps investment committees and developers make smarter choices," he said.

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