Without question, COVID-19 “accelerated the shift” to e-commerce (buying methods) by years, in a matter of months.
Estimates now being tallied indicate that the pandemic added $219 billion to US e-commerce sales between 2020 and 2021 alone. Many reports indicate that this consumer shift to digital purchasing will remain in place.
Economists also say those working from home are shopping online with more frequency as well, creating more and more of a geographical challenge in terms of how and – more importantly – where to procure, stock, deliver and restock items in an efficient manner.
These challenges are creating a thriving industrial real estate market in New Jersey not seen in decades.
Luckily, New Jersey has a top pool of commercial real estate experts to meet these industrial real estate challenges head on by monitoring the market and advising their clients when and where to reposition existing space, and (or) where to build new and much needed industrial logistics facilities and warehouse space, and how to overcome the many hurdles associated with the processes.
“Given strong demand and tight supply, we are now seeing a surge in new construction activity, increasing by 16% (quarter-over-quarter) to 15.4 million square feet as of Q1 2022,” says Thomas Monahan, a CBRE vice chairman. It is predicted that this number will quickly and steadily rise as the uptick in consumer demand drives the market moving forward.
A shining example, as it relates to new construction of industrial hubs is CT Realty’s joint venture with PGIM Real Estate (the real estate investment and financing business of PGIM, the $1.5 trillion global asset management business of Prudential Financial), and their recent acquisition of 282 acres of industrial land for the development of Garden State Logistics Park, a 1.7 million-square-foot, state-of-the-art logistics center in Pennsville.
“This is an exceptionally rare opportunity to assemble a critical mass of land and create a top-flight logistics project in the second largest industrial market in the country,” says Rob Huthnance, who oversees CT Realty’s development activity in the Eastern United States.
The reach (to consumers) from this strategically placed hub is, in a word, impressive. “This project is at the gateway to Southern New Jersey and will serve as a distribution hub for the entire Northeast, able to serve 66 million consumers in a single day’s truck drive,” Huthnance says.
In another highly sought-after location, CenterPoint Properties has acquired a low-coverage industrial facility in the premier Exit 8A submarket at 6 Wheeling Road in Dayton. The 198,000-square-foot Class A building covers just 28% of the nearly 14-acre property, leaving room for expansion.
“This investment continues our momentum in 8A of acquiring institutional-quality, low-coverage assets right off the Turnpike,” says CenterPoint Investment Officer Bryan Won. “6 Wheeling is a well-located Class A asset with superior parking that will stand the test of time in a white-hot 8A submarket.”
The warehouse features 31-foot clear-height ceilings and has a separate two-acre parking grid. It is only “four turns” from the New Jersey Turnpike for efficient trips to Port Newark-Elizabeth and New York City.
“Land suitable for industrial development at Exit 8A is nearly exhausted, making premium assets like the Wheeling Road property even more desirable to companies that need to be near the port and the densely populated Central and Northern New Jersey consumer bases,” says David Nenner, CenterPoint’s senior vice president of asset management.
Unparalleled demand for space and storage in densely populated New Jersey has suppressed industrial vacancy rates. In one stunning example, the Exit 8A submarket vacancy rate is down to just 1%. According to industry analysts, rents for Class A product in the Northern New Jersey market are approaching 30% year-over-year gains.
That said, and as industry experts all agree, demand continues to outpace development and availability, leading to another miraculous (never-before-seen) component of industrial real estate; the adaptive reuse of antiquated, underused or vacant office properties.
“As industrial rents have crept into the mid-to-upper teens on a per-square-foot basis for triple net leases, office properties targeting the mid-twenties on a gross basis have suddenly become very competitive for flex users,” says William Kimmerle, AIA, NCARB, a partner with the multi-faceted Kimmerle Group, Harding Township.
While there are some roadblocks to reinventing office buildings and sites, and not all are conducive to being repositioned, it’s a new frontier being pioneered in the industry.
“Where zoning and planning regulations permit, light industrial and assembly uses are finding that office properties can be attractive homes for industrial users being priced out of the industrial market,” Kimmerle adds.
“The properties present entirely distinct challenges, particularly in-place loading capacity and privacy, but there are also opportunities,” Kimmerle says. He points out that the amenities that have been targeted towards office users in the last decade are now being used to attract flex users, including shared training facilities, cafes and fitness centers, for example.
There are many other large-scale (industrial) construction projects, spec and otherwise, set to begin or already underway in the state. A firm with a major presence in the industry and directly responsible for many of these notable projects is Lincoln Equities Group.
In one stellar example, foundation work is underway for a spec warehouse building at Lincoln Logistics Bayonne, marking another groundbreaking at the award-winning redevelopment of the 153-acre former Military Ocean Terminal property.
Developer Lincoln Equities Group anticipates a year-end delivery for the 330,000-square-foot structure. The new spec structure neighbors an 886,000-square-foot, build-to-suit warehouse, also under construction, which will serve as a regional hub and package distribution center for UPS.
“Lincoln Logistics Bayonne represents the largest infill industrial redevelopment in the New York Metro Area,” says Joel Bergstein, president, Lincoln Equities Group. “Upon completion, these two state-of-the-art warehouse and distribution facilities will fulfill our vision of designing a modern portside distribution center that offers an unparalleled gateway to the entire East Coast corridor via water, land and air.”
Situated on a waterfront peninsula in the heart of the Port of New York/New Jersey, Lincoln Logistics Bayonne is the closest development site to Global Container Marine Terminal, which is located 800 feet away with direct access via a private roadway. Just five miles from Manhattan and nine miles from Newark Liberty International Airport, Lincoln Logistics Bayonne provides robust roadway ingress/egress via the NJ Turnpike (new Exit 14A interchange), I-78 and Route 440.
Imposingly, New Jersey’s industrial market reached new highs in almost all sectors quarter-over-quarter. Q1 2022 leasing activity, which excludes renewals, was 6.2 million square feet, more than double the previous quarter. Net absorption of 1.5 million square feet was positive for the 21st consecutive quarter, while the average asking rent topped its previous record and ended the quarter at $12.21 per square foot.
According to a CBRE report, last year was a record year for large warehouse leases, driven by a rebounding economy and strong e-commerce sales. Companies committed to 57 warehouse leases of one million square feet or larger across the US in 2021, a 19% increase from 2020. Central New Jersey was in the spotlight, ranking ninth in the US, with five of the top 100 largest leases totaling 4.6 million square feet.
“The industrial market in all sectors (in New Jersey) exhibited strong dynamics during the first half of 2022, continuing the pace it has set over the past few years,” says CBRE’s Monahan, in summary.
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