NJ Industrial Markets Healthy, with Good Velocity

RUTHERFORD, NJ— industrial markets are expanding rapidly throughout New Jersey with a good construction pipeline and very little vacancy, according to the Industrial submarkets panelists at this year's RealShare New Jersey conference.

“In the 29 years that I've been doing this, I've never seen this much velocity in all the markets in all categories,” says Tom Monahan, CCIM, SIOR, SVP of CBRE. “Regional markets have very little vacancy all the way down to Exit 8A, local markets up here, very little vacancy. So overall, very good tenant velocity, a very good construction pipeline.”

“We have gotten very full quickly over the last 24 to 36 months, we still see some real rent growth in the portfolio, and we are currently over 95 percent occupied,” says Peter Crovo, SVP and market officer, Prologis. “From our perspective, it's very healthy. By no means is it a landlord's market, but by no means is it a tenant's market. Overall, that is what a healthy economy should look like.”

Brian Milberg, a principal with Sitex Group, says he can't recall ever seeing rents for big-box distribution centers in central New Jersey as high as they are currently. He suggests that some of the reason for the rent increases is because of inflows of foreign capital to the US from other economies he describes as “not as stable.”

“Regardless of changes in interest rates, I don't see that changing the tenant demand or the supply,” says Milberg.

“Industrial is as healthy as healthy can be,” says Sonny Jumani, president, Tulfra Real Estate. “We have seen a lot of rent growth. We had a project about 18 months ago that we put in the ground in the high sixes and it ended up being between eight and 8½ percent triple net.”

A large share of the feverish activity in the industrial market is coming from transformations in the retail space, panelists say. Milberg notes that New Jersey's economy has moved from dependence on manufacturing 20 or more years ago, to distribution centers feeding into e-commerce.

More shopping is moving online, says Monahan, and even bricks and mortar retailers are using the large distribution centers to manage their inventory instead of keeping it in the stock rooms of their stores.

Increasingly, shoppers are finding that they can look at products in the store, but still need to have them delivered to their homes, and retailers are encouraging that by offering rapid, or even same-day delivery from the large distribution centers flanking the New Jersey Turnpike.

The level of activity in the market is even making developers consider replacing office product with industrial property types, says Ernest Christoph, SVP, sales/leasing, Hartz Mountain. His company actually tore down a 350,000 square-foot office property to put up a warehouse. “That's the economics of class B office vs. industrial,” he says.

Despite the rapid advances in development of e-commerce, at least one panelist believes that consolidation is likely. “Only so many companies can service New York City with online grocery delivery,” says Crovo of Prologis.

Also participating in the panel was Jeffrey Milanaik, principal/market officer, Bridge Development Partners. Moderating the panel was Richard Burrow, senior principal, Langan Engineering.