A lack of quality warehouse and logistics space has helped expand the geographical boundaries of leasing activity in the state's industrial real estate market, while causing owners to increasingly look to redevelop or renovate aging facilities to tap into the growing demand.
Those are among the findings of new research by the brokerage firm Transwestern, which released its second-quarter market report for northern and central New Jersey. Analysts with the firm’s Parsippany office found little change in the vacancy rate — which fell to 7.5 percent from 8 percent from the same quarter last year — but say that’s largely a reflection of an ever-tightening market.
“While it says it’s 7.5 percent, it’s not really 7.5 percent — because if you’re a (third-party logistics firm) and you need a modern distribution facility, 7.5 percent of those aren’t vacant,” said Alex Previdi, managing director with Transwestern. “It’s far less, because New Jersey has some antiquated product, which, quite frankly, you just can’t use. … You have an older, antiquated market, which kind of skews that number higher always, and I think even more so today.”
The lack of supply has helped industrial sites that are outside what are traditionally the strongest submarkets — such as the Meadowlands and port region — to submarkets east of Interstate 287 and to points farther south along the New Jersey Turnpike.
“Up north, there’s nowhere to build those kinds of warehouses,” said Matt Dolly, director of research in New Jersey for Transwestern. “So they try to redevelop some of the older ones to attract to some of the New York tenants.”
One of the most high-profile renovation projects is taking place off Exit 12 in Carteret, where Amazon is retrofitting a former Wakefern Food Corp. facility at 8003 Industrial Ave. in the borough. The KTR Capital Partners-owned building will be the site of Amazon’s newest fulfillment center.
On a smaller scale, Bridge Development Partners is demolishing the former Tuscan & Lehigh Dairy facility in Union to make way for a new 263,415-square-foot warehouse. The firm is building the property on a speculative basis, but experts with Transwestern expect that to property to lease quickly.
Previdi noted that the industrial market continues to thrive thanks to e-commerce, third-party logistics and food and beverage users. All around the state, Previdi said, “the demand has been really strong and the fact of the matter that is the options are dwindling.”
“If you were out with a client who is looking to lease (100,000) to 200,000 square feet now, there’s 10 good options, maybe 15 good options, where in the past there’s been more,” he said. “And with modern logistics, as the requirements get more and more specific about what exactly they need by way of ceiling heights, loading docks and yard space … those 10 buildings can decrease to five or six that make sense.”
He added that, for a developer that can deliver those modern features, “I wouldn’t say you could pick your tenant, but you certainly have a bunch of suitors out there who are looking for your space.”
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