Friday, April 17, 2020

Some Industrial Developments May Be Exempt From New Jersey’s Construction Restrictions

By Adin Perera CoStar Analytics

New Jersey Gov. Phil Murphy signed an order last week banning all nonessential construction activity, an action to could make a big impact on the nearly 20 million square feet of industrial space underway across the Garden State. A closer look at the legislation, however, determines that work on some projects may be deemed essential and allowed to continue.

Among other exceptions, construction can proceed on any projects that will be used for the manufacturing, distribution, storage or servicing of essential goods or products. A handful of developments in the state’s industrial pipeline are logistics properties that have been leased to tenants who will serve one of these purposes.

Perhaps the most notable is Bridge Development Partners' 625,000-square-foot project in Somerset, which was leased last September to Amazon. The e-commerce company plans to use the building as a regional distribution center, receiving bulk packages that are then distributed to regional fulfillment centers. Amazon has increased its shipping operations since social distancing policies went into effect and this project will likely be deemed essential and allowed to proceed. The company provides many essential products, including groceries, through Austin-based subsidiary Whole Foods Market.

Duke Realty’s Steel Run Logistics Center is another development that will likely be deemed essential. The Perth Amboy project consists of two distribution buildings totaling more than 1.2 million square feet that have been leased to Home Depot. Hardware stores, such as Home Depot, are considered essential and will be allowed to stay open.

The Amazon and Home Depot projects may still need to adjust their scheduled timelines, even if considered essential. The state government is also mandating additional safety protocols for essential projects that could likely slow the pace of construction. Among the restrictions, worksite meetings and groups will be limited to a maximum of 10 people; workers must maintain 6 feet of distance from each other when possible; and shift start and stop times will be staggered.

Roughly two-thirds of industrial space under construction across New Jersey is available for lease. These projects will have an interesting case to make, as they don’t have tenants lined up to prove an essential business function. Developers may shift leasing strategies to target tenants that provide essential services so that they can proceed with construction, or choose to wait out the construction moratorium. Rules around essential businesses and activities continue to evolve and it’s likely that New Jersey will continue to amend the rules in place as the coronavirus pandemic develops.

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