Given the event's Garden State venue, moderator James L. Dieter, executive managing director of CB Richard Ellis in Chicago, started things off right here by asking the panelists, "why New Jersey for industrial real estate? It has high land costs, tough environmental issues…."

Terming the market "one of the greatest industrial markets in the country," Emanuel Stern, president/COO of the locally based Hartz Mountain Industries, gave credit to "the nexus of population and infrastructure." Virtually all of his company's holdings are in Northern New Jersey, and most of that is industrial product.

On the institutional side, Dann Thomasson, CIO of CalEast Industrial Investors, told the more than 300 attendees that, "all of our clients have a strong desire to have some exposure in New Jersey." Paul Rubacha, president/CEO of Ashley Capital, took the opposite view, indicating that in the long-term investment picture, "there's too much competition from the big gorillas already in the market."

But for those who like the market, "is it about the ports?" Dieter asked. "It's about the fact that it's in the middle of the East Coast, within a 12-hour drive of 45% of the US population," responded Craig Guers, SVP and managing director of the Mid-Atlantic region for Opus East.

Dieter also brought up the issue of congestion, whether it be here or in Southern California. Congestion is an issue, but "you have to be in Southern California and in New Jersey," responded Peter Quinn, senior managing director of Cushman & Wakefield. "Those two markets will always be busy."

Will alternative locations come into play? Dieter posed that question to continue the train of thought, and Guers indicated that eastern Pennsylvania "is already a factor," as Memphis, St. Louis and other locations have already come into play vis-à-vis the Chicago market. Guers did note that "land costs have escalated in price by 300% in eastern Pennsylvania in just the past few years."

Stern also noted that "scarcity of land is a factor. Except for brownfields, there is effectively no land for industrial development in Northern New Jersey." And part of that owes to what Rubacha termed a "municipal agenda. Cities want to use the land for other purposes," notably residential and mixed-use.

As far as the numbers, Thomasson termed most of the country's major industrial markets "healthy," except for possibly Chicago, "which has an oversupply." Generally speaking, rents are up 10% or so here and elsewhere, according to Guers, but he pointed out that the increase is "nowhere near the increase in land and materials costs." Rubacha pointed out that "tenants are looking for more," mostly relating to access and infrastructure, "but they're balking at rent increases."

Stern, meanwhile, said that "the cost of capital is a factor in rent increases." And Thomasson sees "a lot of pent-up inflation in the rental rates."

In terms of the nature of industrial real estate growth, i.e., that it's mostly being fueled by W/D uses, Quinn said that three macro factors are impacting the supply chain, and specifically companies' location decisions. One is that the manufacturing base is shifting to Asia, which changes the equation in terms of accessibility and cost factors. The second is Sarbanes Oxley. And the third is 9/11-related legislation, particularly as it ties to port security.

In a follow-up presentation relating to the supply chain and design-related topics, keynoter Lawrence Shemesh, president of OPSdesign Consulting, a New Jersey-based firm, emphasized that "it all has to be done seamlessly. All the systems have to be integrated. Shemesh illustrated his discussion with his firm's design of Conair Corp's new 390,000-sf RFID-enabled distribution center for Wal-Mart in South Haven, MS. "It's the future of industrial real estate in terms of supporting the supply chain," Shemesh said.

Instant Insights /

RealShare EXCLUSIVE: Nation's Industrial Market Is Healthy

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