SOUTH BRUNSWICK, NJ-Speculative construction of warehouse buildings has sprouted up again along the New Jersey Turnpike, new industrial market reports are noting.
Yet, they also unanimously note the market ended 2012 on a flat note.
CBRE’s William Waxman tells GlobeSt.com that he thinks optimism that the market is on a growth spurt should be “very guarded.” In his view, the demand for large, new state-of-the-art facilities has been mostly generated by the state’s amped-up tax-incentives programs in the past few years, Waxman says.
Meanwhile, the pace of smaller, bread-and-butter deals in the 50,000-square-foot range continues to be sluggish, according to statistical reports from his company and also Cushman & Wakefield.
“The majority of deals that gone in New Jersey are not going to be for these huge new buildings,” Waxman says. “There is a lot of availability in the 30,000-50,000-square-foot range,” adds. CBRE’s and C&W’s 4th quarter numbers both put overall vacancy rates around 10%.
At the powerhouse industrial location Exit 8A of the New Jersey Turnpike, IDI announced it will build a new 751,450-square-foot spec’ building, at the Middlesex Center in Monroe. The second building at the center should be ready for occupancy by July, according to IDI. Frank Petkunas, Northeast regional director of IDI, said the start of work on the building marks resurgence in development in New Jersey.
Petkunas said the building will offer tenants “the best first class option in the market”: state-of-the-art technology, customizable lighting, dock equipment and office space. The office park now has a 1,351,200-square-foot building, and plans call for building a third 450,000-square-foot building later this year.
IDI, which is based in Atlanta, has nearly 7 million square feet under development in nine states. It has been the first to market with new space in several cities coming out of the recession.
Nationwide, the industrial market has held fairly steady over the last year, with lenders, bankers and investors picking it as the most likely sector to pick up the slack should multi-family ever falloff its perch as the leading property type in a recent poll.
Still, Garden State market analysts did not exactly spy shooting stars moving across the industrial scape
“Following substantial growth in industrial sales volume in 2010 and 2011,” said C&W’s Gary Gabriel in a Q4 report, “2012 proved to be a flat year, with $590 million in activity highlighted by one large portfolio trade.”
Both C&W and CBRE’s experts have hedged their bets about 2013 so far, saying the industrial market is certain to do better than the office market –which is expected to keep limping along with vacancy rates of 20%.
Waxman says he sees a post-recession wariness that remains entrenched: “People are still looking in the rearview mirror, and thinking: Well, if I wait, maybe the market will go in the right direction. These days, tenants think the market is worse than it is, so they keep waiting for rents to come down. Landlords think the market is better than it is, and they keep waiting for tenants to make deals.”
He also sees more companies considering locations in Delaware, Pennsylvania and New York, to save on rents. “If a company distributes goods on a Maine-to-Virginia pipeline, then they don’t have to come here to New Jersey to operate,” Waxman notes.
“The state incentive programs have made a difference in luring some companies to New Jersey,” he said. “The companies that can’t take advantage of that are going to trade off a slightly longer delivery route to save money on their leases.”