On the heels of announcements by major retailers closing sites – such as Macy’s shutting down an additional 125 stores nationwide, and ongoing closures here in New Jersey ranging from Walgreens and Sears, to JCPenney and Kmart – it is no surprise that this is all a direct result of the booming e-commerce market, with effects being felt throughout the state’s commercial real estate sector.
New Jersey’s industrial real estate market – encompassing warehouses and distributions centers, and 3PL-type companies all prospecting for spaces to call home – is a hotbed of excitement, with developers and brokers struggling to build or re-adapt space fast enough to meet or keep up with demand.
“The scarcity of available land, especially in northern New Jersey, has slowed development in the past couple of years, and most new construction has been leased up quickly,” says Alex Previdi, managing director at Transwestern. “Following exhaustive searches, challenges with rezoning and environmental factors, developers have replenished the construction pipeline heading into 2020.”
To further bolster that point, it will come as no surprise that the most robust leasing activity in 2019 was in Northern and parts of Central New Jersey where the market saw more than 7.5 million square feet leased in the fourth quarter of 2019 alone. This ended the year with over 29.9 million square feet leased. Average asking rates increased by $0.19 per square foot from the previous quarter to end the year at $8.65 per square foot. Compared to a year prior in the fourth quarter of 2018, rates are up $0.56 per square foot. The vacancy rate continues to decline and ended the year at 2.6%.
In terms of sales, there was more than $476 million in sales volume in the fourth quarter of 2019. The average price per square foot was $107.81. This number excludes portfolio sales. However, this was up $18.81 per square foot from the previous quarter, an immense gain.
“The appetite for industrial space is nothing short of incredible,” says Bill Bumber, managing director of industrial development for Advance Realty Investors.
“There’s a strong push to get closer to the consumer,” adds Bumber, pointing to Linden Logistics Center, the Class A warehouse complex that will be the largest planned industrial development in the Port of New Jersey and New Jersey region. A joint venture of Advance Realty and Greek Development, the 4.1-million-square-foot, state-of-the-art logistics park on a formerly vacant, 350-acre tract of land in Linden, broke ground in 2019.
The redevelopment will consist of eight Class A warehouse buildings designed specifically to meet the needs of logistics, distribution, fulfillment, manufacturing, last-mile-delivery, and other modern industrial users. Delivery of this multi-phase project will begin with the first 1.3 million square feet being completed by the end of this year.
In addition to its prime location, Linden Logistics Center offers flexible layouts to suit specific tenant needs, excess car and trailer parking, rail access, water access, cross-docking capability and access to a high-quality workforce in the New York-New Jersey area.
Advance is also in the process of developing Logan North Industrial Park, a 3-million-square-foot campus in Logan Township. Advance is partnering with Greek Development on this project as well.
Another impressive large-scale project, in fact one of the nation’s largest new industrial developments, is that of Bridge Development Partners’ Bridge Point 78, the former Ingersoll Rand site, in Lopatcong Township and Phillipsburg.
Bridge Point 78 is a six-building, 3.85-million-square-foot complex. Construction on Phase II will begin this summer and will consist of an additional 1.65 million square feet spread across two buildings.
“In developing Bridge Point 78, we sought to catalyze the local economy by delivering a state-of-the-art complex that would attract industrial occupiers of a global caliber,” says Jeff Milanaik, partner, northeast region at Bridge Development Partners.
It appears with Bridge Point 78, the developer has done just that. With seamless access to Interstate 78 and Route 22 as well as direct, toll-free access to the Port of Newark, Bridge Point 78 is strategically located for the shipping and logistics needs of modern industrial tenants. With space around the Turnpike corridor increasing in demand, coupled with a short supply, Bridge Development is meeting and exceeding the strong demand for high-quality warehouse facilities with superior highway connectivity to optimize operations for a highly-important component of the industry, “last-mile delivery users.”
Another of New Jersey’s hottest industrial markets, situated in Monmouth County, is Eatontown, where Denholtz Properties has expanded its presence with the acquisition of two industrial/flex buildings totaling 171,480 square feet, located at 200 and 541 Industrial Way West, respectively. The acquisition expands Denholtz Properties’ New Jersey portfolio to 2.5 million square feet.
“Demand for industrial space in New Jersey remains at an all-time high, and submarkets such as Eatontown present all the fundamentals we look for when sourcing investments in this market,” says Steven Denholtz, CEO of Denholtz Properties. “We look forward to executing our strategic vision for this portfolio to ensure it reaches its full income earning potential to drive superior, risk-adjusted returns on behalf of our investors.”
With vastly differing profiles, 200 and 541 Industrial Way West are complementary investments that create a diverse portfolio with the potential to yield strong value-add returns. Currently 93% leased by six tenants, 541 Industrial Way West is anchored by Spirent Communications, Inc., a subsidiary of Spirent PLC, a major international communications company. In contrast, 200 Industrial Way West is currently vacant, presenting a prime value-add opportunity to upgrade the building, which was originally outfitted for pharmaceutical production. Denholtz Properties plans to convert the property to a modern, 24-foot-clear warehouse building with up to 7,000 square feet of office space.
In closing, it is important to point out that New Jersey’s industrial market closed 2019 with a record-setting decade. With the e-commerce market continuing to thrive, there is literally no sign that the big box bubble will burst anytime soon – or if ever at all.
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