Looking to the NJ Turnpike to Address the E-Commerce Explosion

NEW YORK CITY—Using the New Jersey Turnpike, drivers can reach 61 million people within a 250-mile radius of its core and 40% of the US population within a day’s drive, according to a recent Colliers International report. That makes the turnpike’s corridor prime real estate for the last mile industrial market.

“The challenge is there’s not enough land to build new product on and it can’t be built fast enough,” says Dennis Waggner, executive managing director, market leader, New Jersey, at Colliers. “The e-commerce explosion is requiring quick transporting of goods to the final delivery point.”

He adds, as of the third quarter 2018, along the turnpike corridor there are only 12 Class A industrial buildings that can accommodate a 100,000 square-foot user. The Colliers team is tracking 25 structures under construction totaling 8.1 million square feet, with an additional 100 buildings totaling 35 million square feet in the development pipeline.

The New Jersey Turnpike corridor is a particularly hot investment area these days due to the continued growth in demand for e-commerce delivery. John Obeid, senior director, research, New Jersey, at Colliers emphasizes that location is key. With the turnpike, he says, “That’s where we see demand where there is not enough supply.”

“The boroughs in New York are an interesting story because a lot has been rezoned to multi-family,” Obeid states. “There is a lack of space and the rents in the boroughs are still a little more expensive than they are in New Jersey.” The closer the development is to New York City, the higher the costs of land and labor, he adds.

The Colliers report notes the surrounding infrastructure includes more than 2,800 miles of interstates and highways. Plus, the airports, the Port of New York and New Jersey, multiple bridges and tunnels, and 1,000 miles of freight lines support industrial development. The brokerage’s researchers note there is only one readily available facility for every four occupiers looking for last mile property in this area.

Colliers represents both tenants and landlords. “Things move really fast in the industrial market especially along this corridor. We need to know what’s coming available and what’s under construction,” says Obeid. It’s about knowing the pulse of the market.

Developers are looking to redevelop older, vacant, former office properties says Waggner. He also notes building vertical multistory warehouses in the Meadowlands and Port markets are likely solutions for meeting the unyielding demand.

What about the development of drones disrupting deliveries and displacing demand at the highway’s corridor?

“For the immediate future we’re still looking at ground transportation,” comments Waggner. He opines that drones used for delivery of goods is probably still a decade down the road, noting the regulatory hurdles.

Although demonstrations with smaller drones have become quite common, he points out with drone deliveries of larger items, such as lawn movers, refrigerators or freezers flying above and between buildings in congested cities —that requires a bit more imagination. “It gets a little dicey,” says Waggner.