One firm buying right now is Bridge Development Partners.
"Within the last 12 months we've closed on more the $100 million worth of development," said Steve Poulos, co-founder of Bridge Development. "What's changed is that equity requirements have gone up, and the spreads on the loans have doubled."
More attention to underwriting and the appraisal process is making acquisitions and development more time consuming and difficult, and Poulos reported that "the only deals getting done are infill, core products down the middle of the fairway. The fringe products are not getting done."
That bodes well for Bridge, which has always focused on infill sites. However, the current credit crisis is making tenants a bit hesitant.
"Short-term renewals seem to be the hot button," said Tony Pricco, principal for Bridge Development. "Tenants say 'until we're in more of a stable environment, we're not going to move.'"
Poulos said his firm has also benefited from the increase in exports. "We've stayed away from the big boxes that rely on 3PL's. We accommodate small distribution, international R&D firms and wet lab, which are much more flexible and have benefited from the lower dollar."
Bridge is developing Aptakisic Creek Corporate Park in Buffalo Grove and has buildings nearing completion at Park Butterfield in Aurora.
"We haven't changed our business plan at all," said Mark Christensen, principal with Bridge Development. "There's a large amount of opportunity, and it's a lot less competitive. For a while there was a large spread between the bid and ask - what we were willing to pay. Now we're starting to see landowners be more realistic."
Also, there's less competition for those buying infill sites with institutions, public REIT's and fiduciaries to large pension funds on the sidelines.
"A lot of public REIT's are being scrutinized by shareholders and the general market is in a wait-and-see mode and are not willing to go to far out on risk," Christensen said. "A lot of them are focusing less on acquisitions and more on portfolio management to maximize their portfolio and try to get their stock price back up."
"Any entity that has more of an institutional mentallity or is governed by any connection to Wall Street is hamstrung," Christensen said. "We are strictly private. We have the ability to mix it up and go pursue equity money where it is available. It's a great opportunity for private equity where entities are not beholden to institutions, and for those that have been on the sidelines for the past year or two while institutions have been aggressive. Now that institutions have withdrawn, the private developers are able to provide a lot of equity."
"This crisis is more of a credit market crisis and less of demand-supply issue like the early 90s and the overbuilding of product," Poulos added.
As far as the types of property, "we're being very cautions and much more selective," Pricco said. "We're doing extra due diligence. It doesn't make sense to spend the time and effort if we know we can't get it approved, and underwritten."
"We're getting high-quality assets at attractive prices," Christensen said. "The product type we're chasing is doing well now and it will be only better as things firm up. We try to focus on markets and submarkets with tighter supply."
In Southern Lake County, land prices have been high, but rents have caught up with land prices, Pricco noted.
Tenants at Bridge properties will most likely be smaller firms that assemble or manufacture something and employees will be critical. "The real estate is such a minimal cost component versus the cost of employees," Pricco said. "Being in the right location is critical for growing business. Our tenants want to move into the right building for 10-12 years, it's not a three-year warehousing deal. Image means something to them."