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Space in the right place: Hartz suddenly has huge warehouse inventory in North Jersey

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Ernest Christoph, senior vice president for sales and leasing, Hartz Mountain Industries
Ernest Christoph, senior vice president for sales and leasing, Hartz Mountain Industries - ()

In northern New Jersey, demand for Class A warehouse and distribution space is soaring. Industrial vacancy is shrinking. And shovel-ready construction sites are at a premium.

Executives at Hartz Mountain Industries know this as well as anyone.

So they know it's a rare opportunity to have more than 1 million square feet of big-box, newly renovated industrial space to offer would-be tenants. That's exactly what the Secaucus-based developer will have in the coming months, thanks to new availabilities at three large North Jersey buildings that hadn't been on the market in decades.

The facilities — located in Secaucus, Elizabeth and Jersey City — had each been occupied for 30 years or more, but became available last year when their respective tenants cleared out. Hartz is now jumping on the chance to modernize the buildings and capitalize on the teeming demand for industrial space just outside Manhattan.

“I think the timing is very good,” said Ernest Christoph, the firm's senior vice president for sales and leasing. “We're actually going right into a very strong market.”

The available sites already have started to see activity. Hartz announced last month that Ferguson Enterprises Inc., a plumbing supplier, had leased 450,000 square feet at 100 Meadowlands Parkway in Secaucus, a warehouse that was used by Panasonic Corp. for some four decades.

The deal resulted from a $20 million renovation project that began last fall — as soon as the electronics maker left the property and relocated its U.S. headquarters to Newark. By that time, Hartz had already developed plans to modernize the facility on a speculative basis, “so we began demolition and construction immediately,” said Gus Milano, the firm's managing director.

Hartz still has another 220,000 square feet available at the site. And it's likely to see considerable demand, as are its other properties that are undergoing renovations.

That's because the region's industrial market has been riding high, experts say. In 2013, the overall North Jersey market recorded its greatest net absorption since the onset of the recession in 2008, according to research from the brokerage firm JLL.

And despite what it called a “holiday hangover” that tempered first-quarter leasing volume, total industrial vacancy in North Jersey was still only 7.3 percent, JLL found.

Experts say such activity is being driven in part by a limited supply of large, quality spaces.

“In the northern part of the state here we are very, very land-challenged, so you have to be creative,” said Steve Pastor, an industrial broker and vice president with NAI James E. Hanson, in Hackensack. “When your tenants move, you've got to retrofit the buildings to get them up to today's standards.”

Pastor, a member of the firm's Global Logistics and Ports Practice Group, noted that other large developers in the area are “creating value” by assembling land and buildings from different sellers and then redeveloping the sites. But the stock of move-in-ready space is still limited, he said.

So in a tight submarket, Milano said renovations can be just as good as new construction, especially with the time it can take to get local approvals for ground-up development.

“In our market that we're focused on, there are very few sites” for new construction, Milano said, referring to the northeastern part of New Jersey. There are more opportunities as you approach Central Jersey, he said, but in the Meadowlands, “there are very few opportunities — the land is pretty much absorbed.”

For Hartz, renovations are also now underway at the Elizabeth building — at 201 Bay Ave. — where nearly 400,000 square feet is available for just the second time since the early 1980s.

“The existing tenants left and we knew that it was time to update the building,” Christoph said. He noted that 20 percent of the facility is still occupied, “but we wanted to take that large block of space and completely bring it up to the new modern specs.”

That includes replacing the floor, repainting the building and expanding the rail siding that connects to the nearby shipping terminals of Port Newark-Elizabeth.

Meantime, Hartz is capitalizing on a similar opportunity in Jersey City — at a 450,000-square-foot warehouse at 301 Broadway, just off the Pulaski Skyway.

The building had served as a warehouse for the Hartz Mountain pet products company for some 40 years, Christoph said. The company even continued to lease it once the Stern family, which founded the pet business nearly 90 years ago, sold it to focus on real estate.

But the Hartz pet business said last year it would vacate the building and consolidate out of state, he said, so the developer is seizing the chance to modernize it. That means installing new sprinkler and heating systems, replacing the floors and replacing the loading dock doors.

“The building, by warehousing standards, offers some really good things,” Christoph said, citing its location just six miles from Port Newark-Elizabeth and parking for more than 100 tractor-trailers.

He said the Elizabeth site is available for lease immediately, while the Jersey City one will be available in September.

While Hartz “probably (has) more opportunities than anybody right now,” Pastor noted that there are a handful of other big-box spaces that are now available between Edison and Newark. And several other new construction projects are slated to come online this summer or by year's end.

“In the next six months you could have 10 or 12 large buildings,” Pastor said. “If you're a tenant, you never had those opportunities before ... (so) I think that in the later quarters the advantage is going to go to the tenant, because they're going to have more to choose from.”

E-mail to: joshb@njbiz.com
On Twitter: @joshburdnj

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