Weekend Interview: JLL’s Peter Merrion On Why The Worst Is Behind Us

This series goes deep with some of the most compelling figures in commercial real estate: the deal-makers, the game-changers, the city-shapers and the larger-than-life personalities who keep CRE interesting. 

Earlier this summer, JLL Capital Markets announced it had appointed Senior Managing Director Peter Merrion to co-lead its newly created Denver industrial capital markets team.

Merrion graduated from law school in 2005 with the intent of becoming a criminal defense attorney in Chicago. However, during a clerkship at a public defender’s office, he changed his mind.

“I realized the legal path wasn’t the path I wanted to commit to,” Merrion said.

Merrion grew up in Chicago and was always taken by the city’s iconic architecture. That fascination, along with his career shift, developed into positions at J.F. McKinney & Associates and Golub & Company, both in Chicago. 

Wanting to make a lifestyle change, Merrion and his spouse Kelly decided on Denver as their next place to live and made a “leap of faith” in 2013 to head west.

Merrion told Bisnow about the challenges and opportunities of his new job and his thoughts on today's capital markets landscape for industrial properties and beyond.

This interview has been edited for length and clarity.

Bisnow: You recently took a new position co-leading the newly established industrial investment sales group for JLL in Denver. What are your goals for this position? What are JLL’s goals for this group?

Peter Merrion: I’ll start with the second part of that first. Up until this announcement I had been purely focused on office and life science capital markets in the broader Denver area. That was basically one hat I wore. But within JLL, it’s very common for leadership to be the player-coach, it’s almost always typical in that way.

My second hat I was wearing was also co-heading the overall capital markets group with 50 employees. And I do that with a gentleman named Leon McBroom. Leon and I had spent a lot of time looking at our business in Denver, and all of the services that JLL offers our clients out of the Denver office. And we felt like we had a material gap of the services we were not able to provide clients in the industrial capital market space. We felt like that was a business opportunity, and we know it was something our clients were asking for.

Bisnow: The last several years have been difficult, to say the least, for capital markets across the board, but it seems some capital is beginning to shake loose in certain areas. Why do you think this shift is occurring now? 

Merrion: I’d say a couple of reasons. There is an understanding and a comfort around the disruption. In other words, if you define the second half of 2022 and most of 2023 as a lot of people just saying, “Whoa, which way is up? What does it mean for values when the Fed is on an increasingly upward trajectory with rate increases? What does it mean from an occupier perspective if companies are getting squeezed on inflation costs and their margins?”

So as that played out over 2022 and all of 2023, roughly 18 months, we turned a page at the beginning of this year for a couple of reasons. First, there is something powerful about the mentality of the turn of the page. In other words, new year, new you. The second thing is there has been, and this was well-advertised at the beginning of the pandemic and certainly increased during it, the overall growth of dry powder and capital investing in real estate. Across all assets, across all types. That powder was not doing anything in that timeline.

So it started in 2024 that maybe there’s an opportunity to go do something. And it doesn’t mean that the capital or that investors were being exuberant or blind toward having to be cautious and prudent stewards of their investors. It did, however, translate to, at the beginning of the year, more people putting on a constructive mindset. And it’s through that constructive mindset that we now sit here, in August of 2024, finding more and more people looking for opportunities.

Bisnow: Before this role, you focused mainly on office and life sciences investment deals. With the understanding that you’ll still be leading Denver’s capital markets team in general, what motivated you to dig deeper into industrial sales?

Merrion: I’m a big car guy, so I tend to find these analogies helpful. When Ford all of a sudden says we’re not building enough trucks, because all the customers in the world are telling us they want trucks, it’s smart of them to go toward … that need. We weren’t providing that in Denver. Nationally, JLL is fantastic on the industrial sales side, but in Denver it was very young, very early stages. It felt like that was a business opportunity to increase our market share, our revenue, our relevance, while at the same time meeting the clients’ needs who are asking for that specialization coming out of JLL in Denver.

Bisnow: Drawing on your experience working with office properties, what do you think is the future of the office going forward?

Merrion: It feels like the worst is behind us, from a valuation perspective, and that we’re starting to come out from the bottom. I can tell you on the office side there has been increasing investor activity and a better understanding of the new world relative to pricing basis. So that’s getting more people comfortable with dipping their toes in the office pool.

But at the same time, there are definitely going to be some assets that feel like they just don’t have a future as an office building. And maybe those buildings go away, maybe as a conversion, maybe it’s a tear-down. And I think there are a lot of cities trying to understand this as well. Because, as you know, it’s a massive driver of tax revenues for these municipalities, it’s a massive driver of the overall business ecosystem and business environment, particularly when we’re talking about financial districts, core financial districts.

Denver is not unique in having those challenges. I believe and I know my peers believe long term in the need for office and office as an asset class. It’s going to be a smaller pool than it was, historically. And certainly you’ve heard the flight to quality cliché, but that is absolutely true. It just feels like there’s a level of change happening within the underlying pool of buildings. Some buildings see tremendous success from tenant demand, other buildings are becoming legacy assets that probably don’t have a future.          

Bisnow: What excites you about Denver’s future generally in real estate and economic development? What concerns you?

Merrion: Exciting me continues to be this market’s resilience. I’m talking about the metro [Denver market]. There’s a lot of drivers, some pretty interesting industries and companies going on here. We’ve got some fantastic university systems that deliver, every year, graduates of a good caliber. We have a lot of public infrastructure that is continuing to get enhanced, vis-a-vis work that the city has done on the downtown core, or what the Colorado Department of Transportation has done on our highways. Coupled with our airport, it’s still the third-busiest in the country. It's a huge driver and is becoming more and more critical to some of the major airlines, like United, to become a new hub for them.

A lot is happening just at an infrastructure level. In the world, when you look at a lot of successful cities, if they have that as one of their elements it definitely fosters long-term value creation, long-term growth and it makes it a place that people continue to want to move to, or stay and raise a family and grow into.

My concern is our affordability is quickly becoming unattainable for a lot of people, and that’s true for an employee and true for an employer. In other words, the cost to house labor in our market is becoming challenging. I’ve seen reports that we’re the highest cost of housing for any noncoastal city in the country, and that doesn’t feel like something we don’t want to be. It’s fallen out of balance from what it had been through much of the 2010s, teens and early 2020s.

Bisnow: Give us a bold prediction for the rest of the year. 

Merrion: Increasing optimism and capital deployment in a measured tempo. People are still wanting to do transactions. I don’t believe the election is going to get in the way of that. And I think that the pace of deal volume will increase, but the pace of deal volume will increase at a very steep turn.

Bisnow: What is your weekend routine or favorite weekend activity?

Merrion: My wife and I love long days in the mountains. We’re avid cyclists, trail runners, climbers, backcountry skiers. So when time allows and we’re not both working, We really both enjoy just being outside and doing things that push ourselves physically and mentally.