Monday, May 3, 2021

New Jersey Tries to Control 'Warehouse Sprawl'

 By Linda Moss CoStar News

A high-profile bill aimed at curbing so-called warehouse sprawl in New Jersey, one of the most desirable areas of the United States for industrial development, is facing criticism from business groups who say it could curb the Garden State's record growth surge that's stemmed in part from its unique location.

Senate President Steve Sweeney, D-Gloucester, introduced the proposed legislation, citing the effect that massive distribution-logistics projects already had, and could continue to have, on New Jersey's more rural regions, its open land, traffic and quality of life in communities. With the head of the state Senate driving the measure, it means the issue will get attention.

Under the bill, a municipality would be required to notify and provide a report to adjoining towns when a developer files an application to build a warehouse, allowing the neighboring communities to adopt a resolution of “inter-municipal concern,” according to Sweeney's office. That resolution would entitle them to have their concerns weighed by a joint board that will include members representing each municipality. The report would include a regional economic impact analysis paid for by the proposed project's developer.

The debate stems from New Jersey’s transformation into a warehouse mecca, a phenomenon created by its proximity to high population areas and the explosion of e-commerce and quick delivery expected by consumers. The state is smack in the middle of a densely populated region, home not just to America's most populous city, New York, but Philadelphia as well. Central New Jersey, for example, has access to 19 major markets and nearly 33% of the U.S. population within 24 hours  and is within 2.5 hours of three major ports, namely Newark-Elizabeth, Philadelphia and Baltimore.

And while it is the fourth-smallest state by area, it is the most densely populated, with 9.3 million people. Yet developers are vying for the little vacant land left in the packed Garden State, a nickname that reflects the farms, built on the region's rich soil, that dominated New Jersey into the middle of the 20th century.

The bill, which is co-sponsored by Sen. Troy Singleton, D-Burlington, has raised concerns in the state's commercial real estate industry, including its major trade group NAIOP NJ. The Garden State has seen the demand for distribution facilities far outpace supply as companies such as online retailer Amazon have become a tenant in a number of massive warehouses. Environmentalists want to put the brakes on that type of development, and the proposed legislation aimed at taking a step in that direction.

The Garden State has more than 500 municipalities with broad control, known as home rule, over development within their borders.

"This bill seems to reflect the fact that New Jersey is both a logistics powerhouse state and also a home rule state," NAIOP NJ CEO Michael McGuinness said in an email, adding that his organization "looks forward to working with Senator Sweeney to address concerns raised in the legislation."

Call for Development Safeguards

NAIOP may face a tough sell convincing Sweeney to ease the mandates proposed in his bill. While the most built-out parts of the state like the highly traveled area outside New York City along Route 95 can make the Garden State moniker seem at times ironic, they don't reflect the many small towns and rural areas, officials said.

“New Jersey is proud to be known as the Garden State, but we are at risk of becoming the warehouse state,” Sweeney said in a statement on his bill. “The rapid increase in the construction and operation of retail warehouses poses a threat to the preservation of farmland and open space. The impact of these large-scale projects extends to neighboring communities that can experience economic and environmental consequences that impact their quality of life.”

The construction and operation of large distribution centers have an impact on land use, traffic, the environment, local economies, "the fiscal well-being of municipal governments and social equity in the region," according to Sweeney.

“We need to have safeguards in place that allow for reasonable controls before the projects are approved,” he said. “The host community and neighboring towns need to have a voice in the process and the ability to reject proposals that will cause them harm. The warehouses should be located where they make sense.”

The bill would update zoning laws and state guidance to empower municipalities to control the placement of warehouses and create a 15-member “Intermunicipal Impact Advisory Board” in the state Department of Community Affairs to promulgate guidelines, hear appeals and render decisions.

That could put the brakes on the industrial real estate market in New Jersey, which has been on a tear for the past few years, with demand for logistics and distribution space heightened amid the coronavirus pandemic as more Americans are forced to stay home and shop online.

The vacancy rate for industrial properties in North Jersey is only 3.8%, according to CoStar's most recent report on the sector. Rents have also risen.

"Absorption [space leased minus space that comes onto the market] in the third quarter reached nearly 1.8 million SF [square feet], the highest quarterly reading since 2005," CoStar said. "Strong demand has continued into 2021, with more than 700,000 SF [square feet] of net absorption recorded, and with no supply additions, the vacancy rate has compressed to the lowest level since CoStar began tracking the market."

Sierra Club Push

Sweeney's bill is a step in the right direction but doesn't go far enough in protecting the environment and communities, according to the New Jersey Sierra Club. The state has a least 50 million square feet of warehouse space proposed in environmentally sensitive areas such as the Delaware Bayshore, Highlands and Pinelands regions, Jeff Tittel, director of the group, said in a statement.

"One of the worst ones is a 5.5-[million]-square-foot warehouse on Route 1 in West Windsor," Tittel said. “This issue is critical considering what is happening across the state, especially when one town tries to build a giant warehouse next to another town. We had hoped that this legislation would be stronger. There’s a lot of process, but we’re not sure that there will be a lot of outcomes. The state needs the ability to stop these developments to protect sensitive farmland from more truck traffic, more flooding and more storm-water runoff.”

For example, although the bill sets up a process and an advisory board, "we’re not sure that the board would have the authority to actually say no to projects," Tittel said.

"Meanwhile, state permits and other things could still go on," he said. "This means that these projects could still bulldoze ahead even with this legislation, paving over some of the last unspoiled areas of the state with warehouses. The governor really needs to put a freeze on warehouse projects until we can make changes to stop projects."

South Jersey and places there such as Burlington County, where there is still swaths of vacant land, have seen a burst of logistics construction

“New Jersey has quickly become a major player in the logistics sector due to our ideal regional location and expansive transportation infrastructure," Singleton said in a statement. "In many cases, our open space has been haphazardly developed without consideration of the impact it will have on neighboring municipalities. As a result, surrounding towns are left grappling with increased traffic, congestion and tractor trailers on their local roadways."

The proposed legislation "will not only protect our natural resources, but will also protect the quality of life for the families living in these towns,” according to Singleton.

At least one municipality has addressed the issue on its own. Branchburg last year passed an ordinance, already being challenged by several lawsuits, that bars warehouses as a permitted use in industrial zones.

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