Industrial Deals Getting Scarce
in Seller’s Market

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As reported in GlobeSt.com, Brennan Investment Group, LLC, one of the most active buyers of industrial properties in the metro area, recently bought the 70,196 square-foot 13970 Laurel Dr. in suburban Lake Forest in a joint venture with Goldman Sachs. Although the building is on the small side and the tenant has a relatively short lease, Podolsky|Circle principal Corey B. Chase tells GlobeSt.com that the purchase was not surprising.

“In general, in the Chicago metro area it’s getting harder and harder to find deals,” he says. “There is not enough inventory to satisfy investors. And that is magnified in the North Shore market.”

Rosemont, IL-based Brennan was represented by Chase and Steven H. Podolsky, along with associate Kyle A. McKechnie. The seller was a Chicago-based private investment partnership.

“People love Lake County,” he adds, especially the towns of Lake Forest and Lake Bluff, and when properties hit the market, potential buyers have a great deal of competition. “These deals are really hard to come by.”

And even though The Popcorn Factory, part of the 1-800-Flowers Family of Brands, has a relatively short lease, other factors made the building attractive to Brennan, Chase says. For example, it’s adjacent to 28160 Keith Dr., also occupied by Popcorn Factory, and the latter building was part of a 23-building portfolio that Brennan and Goldman Sachs acquired a few months ago from Mirvac Industrial Trust, an Australian public REIT. The tenant uses the buildings for manufacturing and distribution, including a Popcorn Factory retail outlet store.

“With the current lack of investment opportunities available in the North Shore submarket encompassing both quality real estate and credit tenants, it made sense for Brennan to purchase both buildings,” he says.

“I think it’s a sellers’ market everywhere in the Chicago market,” Chase adds, “and sellers know that.” Many institutional investors “will get dinged by Wall Street if they can’t get enough money out the door.” Therefore, sellers “can pick and choose who they sell to.”

And for the rest of 2015, Chase expects this state of affairs to continue as more investors hit the market looking for deals. Even smaller buildings such as the one just purchased by Brennan, will attract intense interest, much of it from private investors. However, most of them will look for properties that have a good amount of lease term, usually about five to seven years, and some won’t look at anything with less than ten years remaining.