As the commercial real estate sector navigates through a period of transformation, Taurus Investment Holdings is strategically focusing on shallow bay industrial properties—compact warehouses that play a critical role in last-mile distribution. These multi-tenant, smaller industrial facilities are becoming increasingly valuable for urban logistics, offering strategic advantages such as proximity to population centers and flexible tenant arrangements.
Most importantly, the shallow bay space has continued to outperform the rest of the industrial space in property managers' view, according to Peter Merrigan, CEO and managing partner at Taurus.
"The vendors and tenants that need to be in those spaces are to be close to the population base," he told GlobeSt.
"They have very little, limited options. It's one of the few sectors that can't really get overbuilt. Most of those spaces in the major cities have already been taken, most of those land parcels, so there's very limited ability to assemble larger tracts of land at an economic basis."
DON'T OVERLOOK MIDWEST AND MINNEAPOLIS
The intriguing fundamentals for shallow bay assets, currently, led to Taurus' purchase of a 16-property Class B portfolio in Minneapolis/St. Paul, spanning 636,051 square feet, as announced by the company on Tuesday. The shallow bay assets are 96 percent occupied by 71 tenants.
For Taurus, this marks the first time it is entering the Minneapolis.
"The Minnesota, Minneapolis market, is quite compelling. It's a large market. It's incredibly tight," Merrigan said.
However, this isn't the first time Taurus has invested in the Midwest, as it's made acquisitions in Chicago, Kansas City, and Indianapolis.
"Those other portfolios (in the Midwest) have performed incredibly well," Merrigan highlighted, adding that sometimes they might get overlooked because they might not have the same name recognition as other major coastal markets.
"They have great corporate growth and stable populations," he explained further regarding some of the Midwest regions including Minneapolis.
PARTICULAR REGIONS WON'T SCARE TAURUS AWAY
Merrigan noted that the company remains active in looking for investment opportunities across the U.S., and two other countries — the United Kingdom and Germany. That's not just exclusive to shallow bay industrial assets and any particular regions either. The Boston-based firm has developed and bought 70 million square feet of commercial space, which includes multifamily, office, mixed-use, and energy in addition to industrial.
"We don't have any black lines against any particular markets. We're fairly open across the US," Merrigan emphasized.
Rather, its main target is urban population centers; it does not matter if they are in the Midwest or Coastal markets. Particularly, Merrigan said the firm was looking at some distressed opportunities and defensible space. He finds the latter attractive thanks to low development costs.
TAURUS BULLISH ON CRE DESPITE UNFAVORABLE INFLATION TRENDS
Since the pandemic hit the U.S., the CRE market has been extremely volatile, whether caused by inflation or slowing economic conditions. Merrigan said that while there was hope with the Federal Reserve slashing rates and the election ending we would go back to a CRE buying frenzy in the short-term. However, inflation has increased for the third straight month and the 10-year Treasury is up nearly one percentage point currently from its lows in September — leading to some concerns.
However, despite the trends, Merrigan still is optimistic about activity picking up. He thinks we will see some in CRE enter into "capitulation" mode and break from their hesitant positions.
"When that happens, we'll start to see more marked markets, transaction volume pick up, and then more growth-oriented investing strategies, as opposed to just low cost of leverage, which is what you saw in kind of the post-pandemic period," he predicts.
But when that happens is about as good as a guess as anyone. And CRE investors can only hope that the adage "survive until 25" will eventually pay dividends this year.