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NAIOP NJ Panel Sees Strength in Industrial Market Boosted by Influx of E-Commerce Companies

Infrastructure Woes Haven't Derailed Demand for Warehouse/Distribution Space
February 21, 2018
Bill Waxman, executive vice president with the global supply chain practice group at CBRE, was a panelist at NAIOP NJ's Infrastructure and Logistics Update on Wednesday.
Credit: Linda Moss for CoStar News

New Jersey may face its share of infrastructure and transportation challenges, but despite all that, the Garden State’s industrial real estate market remains especially strong, in large part due to its central location and a continuing influx of e-commerce companies, according to several panelists at NAIOP NJ’s breakfast seminar on Wednesday morning.

As evidence, Bill Waxman, executive vice president at CBRE’s Saddle Brook, NJ, office, cited a recent lease deal his firm negotiated with MM.LaFleur, an online retailer of career women’s apparel. The New York City-based company is locating a distribution center at 405 Murray Hill Pky. in the Meadowlands. The East Rutherford, NJ, building MM.LaFleur selected totals 76,518 square feet of Class A industrial space.

Waxman was a speaker at one of two panels presenting at the Infrastructure and Logistics Update, hosted by NAIOP at the Meadowlands Hilton in East Rutherford. The keynote speaker was Anthony Attanasio, executive director of the Utility & Transportation Contractors Association of New Jersey.

After noting the well-publicized issues facing the state’s ailing roads and tunnels and much-criticized NJ Transit system, Attanasio blasted the decision to pull the plug in 2010 on Access to the Region’s Core (ARC), a proposed commuter-rail project that included building a new tunnel under the Hudson River. A similar tunnel project, Gateway, is in a precarious situation now, with no funding commitment, according to Attanasio.

However, he added the future looks brighter for future support. "We have the right governor for infrastructure investment," Attanasio said.

During his panel focusing on the logistics sector, CBRE's Waxman offered a counterpoint, saying his clients haven’t really expressed concerns about New Jersey’s roads or traffic congestion, especially compared to other states such as California. He views the industrial market in North and Central Jersey as robust, and presented comparisons of rents of several properties over recent years to illustrate his point.

In one slide labeled "Sticker Shock," the triple-net leasing rate at an industrial property in East Rutherford averaged $6.98 per square foot from 2008 to 2014, but from 2015 to 2017, that rate rose to $10 per square foot, noted Waxman.

The proliferation of e-commerce businesses and the need to offer swift and even same-day delivery has provided a major boost to New Jersey’s industrial sector, largely due to the state’s proximity to major population centers up and down the East Coast, according to experts.

E-commerce giant Amazon has opened several distribution centers in New Jersey, and in January announced that Newark, NJ, was one of 20 finalists for the company’s second headquarters.

During the infrastructure panel, Carmelo Garcia, acting director of economic and housing development for Newark, said that the city’s downtown is undergoing a $4.2 billion redevelopment renaissance, including a spurt of multifamily housing. He also added that the existing infrastructure can support Amazon.

"The changes we are making now are to modernize, to improve what we have within our transportation and roads," he said.

Meanwhile, the top concern among e-commerce companies are finding good employees and retaining them, Waxman said. In the case of Amazon, it wants walkability for its employees so they have easy access to things like convenience retail, restaurant options and downtown entertainment venues, Garcia said.

Waxman added that internet firms are looking "for people that will stay with them, they’re looking for loyalty, and they’re looking for quality. They’re not just looking for bodies," implying the importance of a well-educated workforce and training opportunities.

Because they have to fulfill orders for individuals, internet warehouses employ two to three times as many people as traditional warehouses for brick-and-mortar retailers, according to Waxman.

However, Waxman conceded that tax incentives remain crucial in drawing tenants to a location like Newark, where taxes and construction and operating costs are high, he added.

"Incentives play a very big part in offsetting some of those costs and making New Jersey more competitive," he said.

Linda Moss, Northern New Jersey Market Reporter  CoStar Group   
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