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NEWARK-The face of industrial real estate is changing, thanks to a variety of economic pressures, and the northeast is already benefiting. “Everything’s changed,” said Curtis Spencer, president of IMS Worldwide, Inc. in his keynote address at this year’s RealShare Industrial East conference. “The ports were at 10% growth, but now the port of LA/Long Beach has dropped off, while the New Jersey/New York ports have continued to grow.”

Spencer gave a number of reasons for this phenomenon. For one thing, Mexico is on the rise as a manufacturing center, and more goods are coming through the Suez Canal and heading to ports in the northeast. The high price of gas is also making companies look more closely at the locations of their distribution centers. Rail, which is plentiful in the northeast, is becoming more popular as a distribution method, and companies are spreading out distribution centers and locating them near major population centers in order to cut down on the number of miles trucks need to travel in order to reach customers.

One of the northeast’s greatest assets is its dense population. The Eastern United States has 66% of the country’s population, and according to Spencer, the East Coast ports will soon begin to seriously compete with the West Coast ports for inland market share. The current state of the economy, however, is making some companies slightly reluctant to expand their industrial base in anticipation of a port boom. “This is a have-to year,” said Tom Tucci, senior managing director of CB Richard Ellis, in his opening remarks for the town hall meeting on the state of industrial real estate. “People are not pulling the trigger on deals unless they have to.”

The panel agreed there is hesitancy dealing for retail space, due to the reduction in consumer spending that accompanied the economic downturn. “Retail has dropped away,” noted Craig Guers, senior vice president and general manager of Opus East. The one bright spot in the retail market is food retailers, who are still demanding space. “People still need to eat,” Guers pointed out.

Despite the slowdown, the panel noted that supply and demand fundamentals for industrial real estate were, overall, still good, and most of the panelists claimed that there was money available for financing. Guers did say that it was difficult securing money for construction as “that’s the province of the banks.” The major issue for most developers, especially in New Jersey, is the lack of available land. “There’s a shortage of land out there, and it’s tough to get entitled,” said Jeff Goggins, managing director of Trammell Crow Co. “I don’t see land prices really dropping.” Guers was in agreement with his assessment, adding, “People who own land will continue to sit on it”.

Going forward, the experts expect to see more foreign investment in U.S. real estate, due to the strength of the Euro against the dollar. In addition, as Spencer noted, fuel costs are causing companies to locate their W/D space closer to customers to cut down on transport costs, and construction costs are rising due to the increase in the cost of diesel and petroleum.

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