Port and shipping advocates say a wider, deeper Panama Canal and a raised Bayonne Bridge could energize New Jersey's economy for years to come, and real estate firms are building plans to cash in on the projected boost to the state's warehouse and distribution market.
The expected surge in cargo volume has prompted one group of industry veterans — Eugene Preston, Eric Witmondt and Marc Lebovitz — to team up and launch Woodmont Industrial Partners, a venture focused on acquiring industrial properties in New Jersey and other key EastCoast port markets. The founders hope to build a portfolio of between 8 million and 10 million square feet of industrial space in the target regions, while focusing on ports with the large consumer bases.
"Obviously, you can only make two or three stops, at most, on the East Coast," said Witmondt, CEO of Woodmont Properties. "You're going to want to hit the New York City marketplace with one of your stops, because that's where one of your largest consumer markets currently exists."
Witmondt, who comes into the venture as a prominent developer of residential space, said the firm will look to amass between 3 million and 5 million square feet of warehouse and distribution space in New Jersey. But its target markets also include Baltimore, South Florida and the inland distributions centers in the Lehigh Valley and Harrisburg regions of Pennsylvania.
"We think there will always be a need for freight, no matter how it comes in — over sea, over rail or over the road," said Lebovitz, president of Romark Logistics. "It doesn't matter how it comes in. It's going to be distributed in these markets."
New Jersey's industrial market already has benefited from an uptick in port activity, which last year exceeded 2008 levels, said Joseph Curto, president of the New York Shipping Association. There has been "a whole flurry of activity around the idea that the ports are going to handle more cargo," he said, and that's expected to continue.
Brokers say several large players are contributing to positive momentum around the ports region. Illinois-based CenterPoint recently acquired 100 Pulaski St., in Bayonne, a 288,000-square-foot building along the Upper Bay. And last month, Terreno Realty Corp., of San Francisco, closed on 620 Division St., in Elizabeth, a 150,000-square-foot space less than 2 miles from the port.
Meanwhile, ProLogis, a longtime specialist in ports development, has furthered that focus following its merge with AMB Property Corp. earlier this year, said Stanley Danzig, executive director and head of the industrial space portfolio at Cushman & Wakefield. He said the Denver-based company has become well-positioned with properties such as the Elizabeth Seaport Business Park, a redeveloped 1 million-square-foot distribution center at the site of a former chemical plant.
But while many developers hope to benefit from the port's success, Woodmont's strategy is not nearly as common, said David Bernhaut, vice chairman of capital markets for Cushman & Wakefield.
"We're seeing a lot of interest and we're seeing a lot of people bid on these types of deals, but it's generally to add to their industrial portfolio," he said. "What we haven't seen a lot of is groups that are saying this is going to be the exclusive focus of our portfolio building."
Still, Bernhaut — whose firm has been retained to help identify investors for Woodmont — said the concept thus far has been well received by institutional investors. The partners want to raise some $300 million in capital for the project.
The venture's first acquisition will be a former K-B Toys warehouse off I-78, in Clinton Township. The company late last month secured zoning approvals to add 36 stock doors to the 729,000-square-foot facility, which the partners said can be marketed as a shipping hub to companies in both New Jersey and Pennsylvania. The property also has the advantage of connecting the two markets through a toll-free corridor, they said.
"If you just sit out on Route 78 and watch the trucks that go by, you see a huge percentage of containers — not just domestic trailers," said Preston, a former senior vice president at ProLogis. "So that's what excites us. In our mind, that's what qualifies that location as a port-related building."
The Woodmont group will also target other inland sites in the Garden State, Preston said, including areas north of Exit 10 on the New Jersey Turnpike. Such a plan can help build a strong, well-rounded portfolio of real estate based on port activity and shipping needs, brokers say.
"People make the mistake of thinking that because your container comes into the port, it can only stay at the port," said William Waxman, executive vice president of C.B. Richard Ellis and leader of the firm's port logistics practice. And while that's true of some companies, he said, "it's not true for most, because if you weigh the rent you would pay at the port versus the cost (to move cargo), it's more often than not cheaper to move a little further away from the port."
Wherever the freight may end up, Curto and other shipping advocates say infrastructure around New Jersey's port is ready to handle a wave of new container traffic. Elizabeth Mayor Chris Bollwage said the only two ways into the terminal — a road from his city and a road from Newark — are well maintained.
His optimism comes despite a stalled project to separate the city's port traffic from traffic to and from its retail centers. The plan — part of a group of Portway projects under the Department of Transportation — has lingered in the design phase for nearly 10 years, he said. "That's an improvement that would greatly alleviate the combination of traffic for the retail centers in Elizabeth and the port traffic for the shipping area," he said.
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