New Jersey's soaring industrial market is in uncharted demand territory, making it difficult to predict when the leasing will cool, local executives say. And they point out that it comes as the state deals with a negative real estate issue, criticism of its programs to award tax breaks to get companies to do business in New Jersey.
The commentary on two of the hottest topics in the Garden State's commercial real estate industry came during a discussion at the annual meeting of the New Jersey chapter of NAIOP in Short Hills. The trade group hosted a panel on the real estate outlook for the coming year, with the logistics sector in the Garden State and its lapsed corporate tax credits on the agenda.
New Jersey, because of its proximity to New York City and area ports, as well as being centrally located in a densely populated region, has been a big beneficiary of the explosion of demand for warehouse and distribution space. That demand has been driven by the growing popularity of online shopping, spurred by e-commerce giant Amazon, as well as other companies and traditional brick-and-mortar retailers looking to offer quick delivery to demanding consumers.
The phenomenon has resulted in record low vacancy rates and rising rents for industrial properties in New Jersey. But panelist Andrew Merin, a vice chairman at Cushman & Wakefield's office in East Rutherford, New Jersey, questioned how long the sector's hot streak can go on.
During his career Merin said he witnessed a run-up in the state's office market, "with phenomenal growth," and that he saw apartment properties "go off the charts" five years ago.
“However, in my 40-plus years I have never seen anything that rivals the velocity and the change that we’ve seen in the industrial market,” he said. “So we’re seeing things that are unprecedented ... I don’t know how long this is going to last because at some point all things peter out.”
Industrial Predictions
Industrial tenants could be leasing space "out in front of demand," which happened to the Jersey City, New Jersey, office market when it was at its height years ago, according to Merin. Large banks were inking 20-year leases for entire buildings on the waterfront, and ended up subleasing some of that space, he said.
“Now we’re seeing e-commerce people taking huge warehouses depending on the future, so it is unbelievable,” Merin said.
One of his fellow panelists raised the same question but predicted logistics will remain strong this year, with rents continuing to increase.
"The big question is is this the beginning of a trend that’s going to have a long runway to it, or does the market appear to be overheated?" said Ed Russo, president of Russo Development, based in Carlstadt, New Jersey.
The family-owned firm specializes in warehouse and distribution facilities, particularly in Northern New Jersey's Meadowlands area. Russo Development and Forsgate Industrial Partners of Teterboro, New Jersey, are developing Kinsgland Meadowlands, more than 3 million square feet of industrial buildings, on speculation, with no signed tenants yet.
Russo remains bullish on the industrial sector, predicting that rents for distribution sites could hit an "unprecedented" $20 a square foot.
Tax Break Fallout
New Jersey's commercial real estate industry has vocally supported the passage of new tax incentive programs for the state as quickly as possible, joining other business groups in saying the tax breaks are critical to attract and retain companies.
The former programs were administered by the New Jersey Economic Development Authority, which has come under fire and investigation for allegedly awarding incentives to companies that didn't deserve them. The old programs expired June 30 last year, and New Jersey Gov. Phil Murphy refused to extend them. He wants to overhaul the tax breaks, but hasn't been able to reach a consensus with state legislators on changes. The criticism over the incentives has made front-page headlines.
Panelist Christopher Paladino, president of New Brunswick Development Corp., said he expects the state will have new tax incentive programs by the spring. But New Jersey will have its work cut out for it in terms of rehabilitating its reputation in corporate America, in places like New York or Philadelphia or Chicago with companies that may be weighing relocating to or expanding in the Garden State, according to Paladino.
“There’s been so much damage done to New Jersey’s reputation," he said.
Nonetheless, while incentives are important to businesses, he said he'd "never had a CFO or a COO or a head of human resources say to me at the first meeting, ‘What are the incentives?’ ”
Catering to Workforce
Employers are more concerned about having access to an educated workforce, or forging relationships with institutions of higher learning like Rutgers University and Princeton University, according to Paladino.
Higher rents are part of the price that companies are willing to pay to draw employees, according to Merin. He cited the recent announcement that Big Four accounting firm Deloitte was relocating one of its offices in suburban Parsippany, New Jersey, to the more urban Morristown, New Jersey. Morristown boasts a train station and a lively downtown scene with many restaurants, bars and stores.
Deloitte could have stayed in Parsippany and continued to pay about $30 a square foot in rent, but instead it is opting to pay $55 a square foot to move to Morristown, according to Merin.
"That huge differential in the rent meant nothing" because Deloitte is striving to attract and retain quality employees, he said.
www.omegare.com
Thursday, January 30, 2020
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Tuesday, January 28, 2020
Fisher Phillips Relocates from Radnor to Philadelphia
by John Jordan Globest.com
National workplace law firm Fisher Phillips is relocating its Philadelphia area office from Radnor, PA to 21,000 square feet of space at Two Logan Square in Center City here.
The law firm has signed a lease for space on the 12th floor of the 35-story tower building and expects to take occupancy in April. The firm’s current Philadelphia area office is located at 150 N. Radnor Chester Road in Radnor, PA.
Chris Stief, managing partner Fisher Phillips’ Philadelphia office, says, “The move will provide us a space at the core of Philadelphia’s business and legal markets and positions us to attract even more talent at all levels, including partners, associates and staff. Our goal was to find a space that uniquely positions us for our next decade of growth in Philadelphia.”
He adds that the move will increase its presence in Philadelphia by approximately 6,000 square feet. Fisher Phillips established its presence in Philadelphia with the opening of its office in Radnor in 2007. The firm’s Philadelphia area office has grown from six to 23 attorneys and is home to national leadership of Fisher Phillips’ Employment Defense Litigation Practice Group, Employee Defection and Trade Secrets Practice Group, International Employment Practice Group, the Data Security and Workplace Privacy team, the firm’s E-Discovery Committee and the firm’s Government Relations subsidiary, FP Advocacy.
Fisher Phillips recently announced the opening of two new offices in Nashville and Detroit, and the intent to further expand its Los Angeles presence with an office in the San Fernando Valley. In 2019, the firm opened a Pittsburgh office, bringing on a team of three workplace safety partners.
The new 4,000-square-foot Nashville office is located at 3310 West End Ave. Fisher Phillips signed the lease in November and the firm began occupying the space in late December.
Earlier this month, the law firm had joined forces with The Murray Law Group, a boutique labor, employment, and immigration firm located in metropolitan Detroit. The combined firm is now located at 31780 Telegraph Road, Bingham Farms, MI and became the firm’s 36th office location.
www.omegare.com
National workplace law firm Fisher Phillips is relocating its Philadelphia area office from Radnor, PA to 21,000 square feet of space at Two Logan Square in Center City here.
The law firm has signed a lease for space on the 12th floor of the 35-story tower building and expects to take occupancy in April. The firm’s current Philadelphia area office is located at 150 N. Radnor Chester Road in Radnor, PA.
Chris Stief, managing partner Fisher Phillips’ Philadelphia office, says, “The move will provide us a space at the core of Philadelphia’s business and legal markets and positions us to attract even more talent at all levels, including partners, associates and staff. Our goal was to find a space that uniquely positions us for our next decade of growth in Philadelphia.”
He adds that the move will increase its presence in Philadelphia by approximately 6,000 square feet. Fisher Phillips established its presence in Philadelphia with the opening of its office in Radnor in 2007. The firm’s Philadelphia area office has grown from six to 23 attorneys and is home to national leadership of Fisher Phillips’ Employment Defense Litigation Practice Group, Employee Defection and Trade Secrets Practice Group, International Employment Practice Group, the Data Security and Workplace Privacy team, the firm’s E-Discovery Committee and the firm’s Government Relations subsidiary, FP Advocacy.
Fisher Phillips recently announced the opening of two new offices in Nashville and Detroit, and the intent to further expand its Los Angeles presence with an office in the San Fernando Valley. In 2019, the firm opened a Pittsburgh office, bringing on a team of three workplace safety partners.
The new 4,000-square-foot Nashville office is located at 3310 West End Ave. Fisher Phillips signed the lease in November and the firm began occupying the space in late December.
Earlier this month, the law firm had joined forces with The Murray Law Group, a boutique labor, employment, and immigration firm located in metropolitan Detroit. The combined firm is now located at 31780 Telegraph Road, Bingham Farms, MI and became the firm’s 36th office location.
www.omegare.com
Philadelphia Based Alterra Bets on Outside Storage Properties as a New Investment Strategy
As demand for industrial real estate spreads beyond warehouses into outside storage for trucks and heavy equipment, Alterra Property Group is lining up major investors to amass a portfolio of these low-cost utilitarian properties.
Alterra, based in Philadelphia, and institutional investors advised by J.P. Morgan Asset Management formed a $300 million joint venture to buy properties they're calling industrial outside storage, or IOS for short. Alterra considers these sites to be untapped assets within the broader traditional industrial property sector. It comes as investments in other types of industrial real estate, including self-storage, data centers and biotech labs, have been increasing in recent years.
The Alterra-led group seeks to add another category by acquiring properties leased to tenants needing two to 50 acres for outside storage and who only require a small building – about 20,000 square feet or so. Such properties sell in a range from a few hundred thousand to a few million dollars, far less than the typical institutional investor target that can reach into the tens of millions of dollars or more.
Ownership of such properties is highly fragmented. Most landlords are local and private, with outside storage tenants ranging in activity from truck parking, port-related container storage, equipment rental, building materials and petrochemical delivery. But one thing they have in common: There's a finite supply, which means their value may be poised to increase.
"The U.S. economy is based on something being manufactured in one place and consumed in a different place. Those goods make several stops between the plant and the point of consumption," Leo Addimando, founder and managing partner at Alterra, told CoStar. It is those stops in between on which Alterra is focusing.
Private owners and owner/users have made up about $7.6 billion of the five-year total of $10.1 billion in property purchases matching Alterra's criteria, according to CoStar data. Such sales averaged about $1.8 billion a year from 2015 to 2018 but jumped to $2.6 billion last year.
Such properties are critical for supporting the growth of online shopping and new construction. For warehouses to be useful, shipping containers, semitrailers and rail cars are needed to move goods around. For new buildings to be built, materials and equipment need be shipped to construction sites.
"All of that has its own support real estate needs," Addimando said, "and so we're buying those yards. At the end of the day, we're basically buying the growth of the economy."
The goal of the joint venture is to build a portfolio valued at several hundred million dollars, centered on single-tenant leases, and that capitalizes on the shrinking supply of outside storage sites in growing markets.
Growth Areas
Users of such locations have specific location requirements, according to Addimando. They want to be in the path of growth.
"In a lot of cases, they are getting priced out of places where they naturally need to be to access their customers," Addimando said. "If you're the landlord, you're really in a win-win situation. You feel good because if they leave it empty, it's just worth a lot more money as something else."
Finding yield beyond the traditional property segments is growing, according to Alterra and J.P. Morgan. Property types outside the four traditional sectors of office, multifamily, retail and industrial distribution centers now account for about 40% of the publicly traded real estate investment trust market.
Publicly traded REITs such as Terreno Realty, Rexford Industrial Realty and National Retail Properties acquire and own such properties but not as a primary focus. Such holdings make up 10% or less of their holdings.
And publicly traded REITs have acquired only about $309 million of properties in the past five years with criteria similar to what Alterra is targeting, according to CoStar data. But their activity is growing. They acquired nearly $130 million of similar properties last year, up from $37 million in 2018.
Other institutional and private equity funds too have acquired such properties but as a smaller part of their portfolios. Their five-year total came to about $433 million, according to CoStar data. Their 2019 volume of $155 million doubled their average annual volume of the previous four years.
"If you think back 10 years, single-family homes were not an institutional asset class," Addimando said. "Go back 20 years, mobile homes were not an institutional asset. If you go back 30 years, self-storage was not an institutional asset class. We strongly believe this is the next new category of real estate to become less fragmented and more institutionally owned."
Since forming the joint venture, the group has already acquired four properties. The latest was a $4.2 million purchase of 3800 N. Powerline Road in Pompano Beach, Florida. Maxim Crane Works sold and leased back the 3.37-acre property with a 14,000-square-foot building.
www.omegare.com
Alterra, based in Philadelphia, and institutional investors advised by J.P. Morgan Asset Management formed a $300 million joint venture to buy properties they're calling industrial outside storage, or IOS for short. Alterra considers these sites to be untapped assets within the broader traditional industrial property sector. It comes as investments in other types of industrial real estate, including self-storage, data centers and biotech labs, have been increasing in recent years.
The Alterra-led group seeks to add another category by acquiring properties leased to tenants needing two to 50 acres for outside storage and who only require a small building – about 20,000 square feet or so. Such properties sell in a range from a few hundred thousand to a few million dollars, far less than the typical institutional investor target that can reach into the tens of millions of dollars or more.
Ownership of such properties is highly fragmented. Most landlords are local and private, with outside storage tenants ranging in activity from truck parking, port-related container storage, equipment rental, building materials and petrochemical delivery. But one thing they have in common: There's a finite supply, which means their value may be poised to increase.
"The U.S. economy is based on something being manufactured in one place and consumed in a different place. Those goods make several stops between the plant and the point of consumption," Leo Addimando, founder and managing partner at Alterra, told CoStar. It is those stops in between on which Alterra is focusing.
Private owners and owner/users have made up about $7.6 billion of the five-year total of $10.1 billion in property purchases matching Alterra's criteria, according to CoStar data. Such sales averaged about $1.8 billion a year from 2015 to 2018 but jumped to $2.6 billion last year.
Such properties are critical for supporting the growth of online shopping and new construction. For warehouses to be useful, shipping containers, semitrailers and rail cars are needed to move goods around. For new buildings to be built, materials and equipment need be shipped to construction sites.
"All of that has its own support real estate needs," Addimando said, "and so we're buying those yards. At the end of the day, we're basically buying the growth of the economy."
The goal of the joint venture is to build a portfolio valued at several hundred million dollars, centered on single-tenant leases, and that capitalizes on the shrinking supply of outside storage sites in growing markets.
Growth Areas
Users of such locations have specific location requirements, according to Addimando. They want to be in the path of growth.
"In a lot of cases, they are getting priced out of places where they naturally need to be to access their customers," Addimando said. "If you're the landlord, you're really in a win-win situation. You feel good because if they leave it empty, it's just worth a lot more money as something else."
Finding yield beyond the traditional property segments is growing, according to Alterra and J.P. Morgan. Property types outside the four traditional sectors of office, multifamily, retail and industrial distribution centers now account for about 40% of the publicly traded real estate investment trust market.
Publicly traded REITs such as Terreno Realty, Rexford Industrial Realty and National Retail Properties acquire and own such properties but not as a primary focus. Such holdings make up 10% or less of their holdings.
And publicly traded REITs have acquired only about $309 million of properties in the past five years with criteria similar to what Alterra is targeting, according to CoStar data. But their activity is growing. They acquired nearly $130 million of similar properties last year, up from $37 million in 2018.
Other institutional and private equity funds too have acquired such properties but as a smaller part of their portfolios. Their five-year total came to about $433 million, according to CoStar data. Their 2019 volume of $155 million doubled their average annual volume of the previous four years.
"If you think back 10 years, single-family homes were not an institutional asset class," Addimando said. "Go back 20 years, mobile homes were not an institutional asset. If you go back 30 years, self-storage was not an institutional asset class. We strongly believe this is the next new category of real estate to become less fragmented and more institutionally owned."
Since forming the joint venture, the group has already acquired four properties. The latest was a $4.2 million purchase of 3800 N. Powerline Road in Pompano Beach, Florida. Maxim Crane Works sold and leased back the 3.37-acre property with a 14,000-square-foot building.
www.omegare.com
Crunch Fitness Opens New Location in Philadelphia
Crunch Fitness, a fitness center chain headquartered in New York, is opening a new location in Philadelphia.
The gym has leased 30,619 square feet at Northeast Shopping Center. Located at 9165-9175 Roosevelt Blvd., the center spans 42.5 acres less than two miles from Northeast Philadelphia Airport.
Crunch Fitness currently has more than 300 gyms worldwide.
www.omegare.com
The gym has leased 30,619 square feet at Northeast Shopping Center. Located at 9165-9175 Roosevelt Blvd., the center spans 42.5 acres less than two miles from Northeast Philadelphia Airport.
Crunch Fitness currently has more than 300 gyms worldwide.
www.omegare.com
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