NORTHEAST SNAPSHOT, DECEMBER 2007

New Jersey Industrial Market

New Jersey’s industrial market is no longer separated into south, central and northern industrial markets. Instead, the boundaries have disappeared and blended to become one large, homogenous market.

Rather than focusing on specific regions within the state, developers are looking to New Jersey’s expanding ports and brownfields sites for future projects. A significant amount of industrial development is taking place along the turnpike, specifically around the belt encompassing exits 5, 6, 7, 7A, 8A, 12, 13 and 14. Due to the lack of developable land, the area north of Exit 8A has been a key area of interest because of its brownfields sites.

The industrial market has attracted a number of large national developers to the area, several of whom have been responsible for significant developments. IDI has constructed two distribution facilities in the submarket of turnpike Exit 8A: Middlesex Center, totaling 1.35 million square feet, and the 680,000-square-foot 324 Half Acre Road facility, featuring 36-foot clear-height ceilings and 116 loading docks.

Another newcomer to the area, Panattoni Development, is constructing iPort International Trade & Logistics Center, an approximately 1.3 million-square-foot industrial center that sits on a former landfill site adjacent to Exit 12 of the turnpike. The center’s two buildings will feature 36-foot ceilings, ESFR sprinklers, dock and grade-level doors and 80-foot by 72-foot bays. Other developers establishing themselves in the industry include Seagis and KTR Capital.

Prologis, which has had much success here, has been active in New Jersey’s port areas and has been buying brownfield sites for future development. AMB Property Corporation’s  191,196-square-foot AMB Liberty Logistics Center is one of several developments that AMB has constructed for the Port of New York/New Jersey, the second-largest port in the United States.

Currently New Jersey’s rental rates range from $4.50 to $7.50 net, and the statewide availability rate is sitting at 7.4 percent. As new supply comes on the market, landlords will feel the pressure as rental rates drop.  And, in addition to this new supply hitting the market, second-generation space has also come back on the market as many of New Jersey’s corporations downsize, merge or even flee the state. At the end of third quarter 2007, leasing and sales velocity was down about 40 percent from third quarter 2006. A future problem site could be the Meadowlands, which may suffer a large drop due to the buildings becoming obsolete and the prices remaining traditionally high.

When it comes to the state’s tenants, demographics vary, as many of New Jersey’s transactions are sourced from a large variety of surrounding areas. US Foodservice leased 450,000 square feet in Perth Amboy, while Phoenix Logistics absorbed 200,000 square feet in Jersey City. In addition, International Paper is reportedly leasing 600,000 square feet in Burlington.

The New Jersey industrial market has been taking a back seat to Pennsylvania in terms of large-scale deals due to its more business-friendly atmosphere and lower tenant occupancy costs. However, this trend is predicted to change in the next year or so. The New Jersey Turnpike corridor will continue to be of great significance to the industrial market. Its location, in the middle of the number one consumer zone in the country, certainly contributes to its market prominence.

—  William Waxman is senior vice president at CB Richard Ellis in Saddle Brook, New Jersey.

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