New Jersey's Warehouse Space Surges With US Logistics Demand

Northern New Jersey is undergoing unabated demand for U.S. industrial real estate as tenants snap up space at large new distribution properties.

A five-building development anchored by electronics retailer Best Buy is one of the latest massive complexes to open, while companies such as home improvement chain The Home Depot, Japanese fashion retailer Uniqlo and e-commerce giant Amazon are among those signing big logistics leases in the Garden State.

Industrial real estate is a surging sector in markets across the nation, with demand driven by the rise of e-commerce and consumer expectations of quick, sometimes same-day, delivery. This movement is exacerbated in New Jersey, where the scarcity of modern, top-of-the-line warehouse space and a lack of vacant land to build it, has meant that need has far exceeded supply. The state is a popular choice for distribution hubs because of its central location in the densely populated region around the most-populous U.S. city, New York, and proximity to ports and highways.

So far this year, 6.3 million square feet of new industrial space has been completed in New Jersey, including 1.5 million square feet during the third quarter. That's caused industrial vacancy rates to drop below historical averages.

"Demand for new product remains strong, evidenced by 69.1% preleasing on 2019 deliveries. This velocity shows no sign of slowing down, and the development community is responding. In fact, we are anticipating more than 18 million square feet in the industrial pipeline through mid-2021."

There is now 8.1 million square feet of warehouse space under development, possibly lifting construction volume to a century-high mark in 2020, according to Price.

Developers are trying to help replenish limited top-flight warehouse supply while there's strong tenant interest, he said, as the U.S. economic expansion reached its longest stretch in history this summer.

And 12 of the 17 facilities under construction are larger than 300,000 square feet, with four more than 800,000 square feet, according to Price.

‘Demand for Everything’

Last week, Rockefeller Group held a ribbon-cutting at its Rockefeller Group Logistics Center, a 2.1 million-square-foot industrial park in Piscataway, New Jersey, that's fully leased to Best Buy, heating and cooling solutions provider Fujitsu General, office furniture maker Humanscale, cosmetics company Kiss Products and tech equipment seller SHI. The developer is also constructing a 900,022-square-foot industrial facility, called 10Edison, at 2195 State Route 27 in Edison.

"What you’re finding is folks are out looking for space, and there’s really not a lot of options for them,” said Mark Shearer, senior vice president and regional development officer for Rockefeller's New Jersey-Pennsylvania region. "There’s user demand for everything that we started. The way it’s working is as soon as we get permitted and start really putting concrete down, we really start getting interest.”

There's also been interest in tenants buying their buildings, as well as third parties looking to invest in industrial developments.

Kiss acquired its Piscataway building from Rockefeller this year for $66 million. And DWS Group bought the two buildings leased by Best Buy, Fujitsu and Humanscale for $184.1 million.

Some of the larger New Jersey industrial projects in the works now include:

• A joint venture of Advance Realty Investors, Greek Development and PGIM Real Estate is building the Linden Logistics Center, a 4.1 million-square-foot complex in Linden.
• Bridge Development Partners is constructing Bridge Point 78, a 4 million-square-foot logistics hub on the site of a former Ingersoll Rand plant in Phillipsburg in Warren County.
• Russo Development and Forsgate Industrial Partners are developing Kingsland Meadowlands, a 3 million-square-foot logistics center on a 718-acre site that spans Lyndhurst, Rutherford and North Arlington in the North Jersey meadowlands.
• Lincoln Equities Group is redeveloping a site at the former Military Ocean Terminal in Bayonne into 1.4 million square feet of industrial warehouse space called Lincoln Logistics Bayonne.
• Crow Holdings Industrial is developing a 925,000-square-foot warehouse at 50 Veronica Ave. in Franklin Township, its first foray into New Jersey.

Big-Box Leases

Two retailers have accounted for the biggest industrial leases so far this year in New Jersey, in the second and third quarters, showing the appetite for big-box space. Home Depot has committed to 1.3 million square feet at 225 Elm St. in Perth Amboy. And Uniqlo has leased 975,761 square feet at 942 Memorial Parkway, which is part of the Bridge Development industrial park in Phillipsburg, according to third-quarter reports.

Amazon is also increasing its industrial footprint in the state. Bridge Development is building a new 625,000-square-foot warehouse for the Seattle-based company at 495 Weston Canal Road in Somerset. New Jersey. In addition, Amazon has leased 243,751 square feet of industrial space at 118 Moonachie Ave. in Carlstadt, according to Russo's third-quarter report. Amazon will soon have 11.7 million square feet of industrial space in New Jersey, the report said.

Industrial vacancy rates in New Jersey have hit lows not seen in the past five years. In northern New Jersey, the vacancy rate is averaging 4.4%. In its third-quarter report, the industrial vacancy rate for northern and central New Jersey combined at 4.8%.

Many were bullish because of some fundamentals they cited.

"E-commerce sales have edged higher by 13.3% compared to one year ago and continue to push warehouse markets both locally and nationally to new heights as the need for distribution centers and last mile facilities persist at a brisk rate."

"As the supply of land shrinks, developers will take on a growing number of redevelopment projects to keep up with demand. The restocked construction pipeline is expected to drive more big-box leasing in future quarters as large tenants create new requirements."
www.omegare.com