Tempus' 2023 Recap and Future Outlook

Westrock Coffee Company - Conway, AR

At Tempus, we're thrilled to announce the successful closure of 2023 with strong performances across our ventures. Throughout 2023, our investments, including those through Evergreen and Direct Investments, amounted to $168 million in acquisitions of industrial and manufacturing facilities, covering more than 2.4 million square feet. Additionally, we're proud to highlight the completion of the Westrock distribution center, a monumental project totaling $72 million and spanning over 530,000 square feet.

Each acquisition represents the culmination of meticulous due diligence, a process that demands careful consideration by our team. By the close of 2023, our team had underwritten properties valued at more than $2.75 billion to identify the select few we eventually purchased. However, this year has not been without challenges. In the fourth quarter, we continued to face hurdles in our multi-tenant office properties as our team continues to diligently navigate the most difficult investment environment for office properties in generations. Thanks to the dedicated efforts of the Tempus team and our local partners, we achieved a notable increase in occupancy across our multi-tenant office portfolio, rising from 80% at the close of 2022 to 85% by the end of 2023 helping position us to navigate this period in significantly better condition than many of our peers.

While we continue to manage our existing office holdings, our focus remains on exploring opportunities within the industrial sale-leaseback market. With each successful transaction, our reputation as a formidable buyer strengthens, attracting interest from premier brokers and private equity firms nationwide. This presents an exciting prospect to capitalize on investments in our target markets which continue to benefit from resurgent job growth and the return of manufacturing operations from overseas.

Recent global events, including COVID-19 disruptions and geopolitical tensions, have prompted a reevaluation of manufacturing strategies. Companies, from major corporations to small businesses, are reconsidering the benefits of overseas production in favor of domestic operations. The advantages are clear: shorter transportation times, reduced volatility, and enhanced control over intellectual property.

The Reshoring Initiative's findings underscore this shift, with reshoring and foreign direct investment job announcements in the first half of 2023 continuing at the record rates from 2022. Notably, the average spending on U.S. factory construction has more than doubled over the past 17 years, indicating a robust resurgence in domestic manufacturing, a pace that is expected to continue for the foreseeable future.

Analyzing The Reshoring Initiative's reports, key states such as Kentucky, Georgia, South Carolina, North Carolina, and Ohio are prime destinations for reshoring initiatives. Tempus has recently acquired properties in each of these states, with the exception of Kentucky, drawn by factors such as population growth, job market dynamics, and affordability.

Moreover, a notable change in the trend of population migration is reshaping the commercial landscape, as urban dwellers increasingly migrate to suburbs and smaller cities. Census data reveals significant population shifts away from major metropolitan areas like California, Illinois, and New York, indicating a preference for less densely populated regions.

This relocation trend is particularly pronounced in the Southeast, fueled by factors including cost of living, remote work opportunities, favorable business climate and job market dynamics. The disparity between available labor and job openings is stark, with less populated states in the American Heartland leading the way in terms of per capita available jobs.

As we progress into 2024 and beyond, we anticipate that Tempus' primary markets in the Midwest and Southeast will continue to thrive as havens for job growth. The migration from coastal hubs to middle America is poised to persist, aligning with the availability of employment opportunities and the evolving economic landscape. As these areas continue to attract jobs, the value of real estate in these areas is likely to increase in a trend that is likely to extend well beyond the current economic cycle.

While challenges persist for the real estate industry, the outlook for Tempus and the areas we invest remains optimistic. We believe we’re well positioned in investments that are poised to thrive for many years to come. With this long-term vision and prudent navigation of short term disruptions, we believe our focus areas are primed for many years of successful outcomes.

Clay Ramey
Partner and VP of Capital Markets