FEATURE ARTICLE, MARCH/APRIL 2012

ASIAN INVESTMENT EXPECTED TO GROW IN NEW JERSEY PORT AREA

NEWARK, N.J. — With a major expansion of the Panama Canal expected to be complete by the end of 2014, Port Newark — and ports across the nation — are racing to dig deeper harbors capable of handling the gigantic new ships that will have access to the ports.

Real estate experts say this growth is one reason a wave of Asian investors, particularly those from China, have been acquiring properties near the Port Newark Container Terminal in recent years. The port is the largest cargo facility in the Port of New York and New Jersey.

Ford

“China is by far the largest importer of goods through Port Newark,” says Ross Ford, CEO of TCN Worldwide, a consortium of independent commercial real estate firms across the U.S., including New Jersey.

According to a 2010 Port Authority of New York and New Jersey report, Chinese imports made up 27.8 percent of all goods entering the Port of New York and New Jersey. India was the second largest, accounting for 6.9 percent of imports.

In 2011, a number of Asian companies moved into the New Jersey industrial market, or extended their leases. Sun Taiyang Co. inked a new 95,542-square-foot industrial lease in Moonachie last November. Three months earlier, Asian food distributor Walong Marketing renewed its 175,456-square-foot lease at 99 Caven Point Rd. in Jersey City. The facility has served as the company’s East Coast distribution center for 10 years and Walong will stay in place for an additional 20 years. In South Brunswick, Korean company Hanook Tire took 411,000 square feet at 18 Thatcher Rd.

William Sitar, CEO of Sitar Realty Co./TCN Worldwide, says New York is a primary market for many Chinese companies, and some anticipate an increase in port business following the $5.2 billion Panama Canal project. The widening will allow large cargo ships that currently anchor in California and use trucks and railways to move goods to the East Coast, to sail directly to New Jersey.

Sitar

“For many Chinese companies, this is becoming what you might say is a second base. They have been shipping here before, directly to users, and now they’re coming here to buy and construct buildings,” says Sitar.

Sitar Realty, the third largest brokerage firm in New Jersey, specializes in industrial and office leasing and sales. The brokerage company is currently working with a Chinese textile company that is seeking a public warehouse to handle its product. Sitar says companies new to the market generally begin by making small shipments — some as limited as two containers per month — and use space in a public warehouse, a facility which provides short- or long-term storage to companies on a month-to-month basis.

“By the time the year ends, they have a dozen containers a month. They realize they need their own warehouse because their growth has been so fast. That’s usually when they contact us to find a location,” he says.

Signs of growth in the industrial market have been apparent in the region. During the third quarter, the vacancy rate for the Central New Jersey industrial market remained the lowest it’s been in 24 months, according to Jones Lang LaSalle. The 80 basis point drop to 9.6 percent was due to a lack of new development, coupled with several large new lease transactions. Average asking rents remained unchanged from the previous quarter. However, they are expected to slowly increase as the positive net absorption trend continues.

Port activity also has grown at a steady pace. Twenty-foot Equivalent Units (TEUs) at the Port of New York and New Jersey increased by 6.1 percent between January and September 2011 compared with the same period in 2010, according to a third-quarter 2011 New Jersey Industrial Outlook report by Jones Lang LaSalle.

To take advantage of the canal expansion and the improving market conditions, the New Jersey terminal is currently undergoing a $500 million expansion. Part of the money will be used to deepen the riverbanks surrounding Port Newark, and the terminal will be expanded from 180 acres to 278 acres. In a separate deal, a major port client, the Mediterranean Shipping Co. has announced it’s scheduled to increase from 414,000 to 1.1 million containers by 2030.

In addition, dredging underway in the New York Harbor and the raising of the Bayonne Bridge will enable New Jersey’s ports to handle larger ships, says Sitar.

Sitar says his Chinese-based clients will continue to pursue more container handling capacity as port traffic increases. “The same type of statistics hold true for the Port of Los Angeles on the West Coast,” says Ford. “I would imagine when you look at other major ports, you would see the same trend in those marketplaces as well.”

In recent years, the Chinese government has also been urging companies to invest in real estate overseas, to develop business partnerships and diversify the country’s foreign holdings.

— Liz Burlingame

©2012 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.




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