400 and 600 Atrium Drive in Somerset — Courtesy: EverWest Real Estate Investors
By Joshua Burd
A joint venture has acquired an office building and adjacent land in Franklin Township, with plans to redevelop the site as a two-building, 426,000-square-foot industrial campus.
The partners, EverWest Real Estate Investors and Woodmont Properties, say the parcels at 400 and 600 Atrium Drive provide 31 contiguous acres in the township’s Somerset section, part of a burgeoning submarket for logistics space. They intend to vacate and raze the 351,782-square-foot office building by early next year, paving the way for what will be high-end warehouse and distribution facilities totaling 294,000 and 132,000 square feet, respectively.
The developers purchased the sites for $42.7 million.
“Somerset is one of the fastest-growing industrial submarkets in the New Jersey market, with limited existing availability, modest new speculative construction and a growing list of major users and investors turning their interest toward the area,” said Stephen Feinberg, EverWest’s director of Northeast acquisitions. “This project will make the most of those fundamentals, capitalizing on a location that provides immediate access to I-287 while leveraging the area’s excellent labor pool.”
The firms announced the deal Wednesday, citing the rapid growth of industrial rents in Somerset from below $4 per square foot in 2013 to almost $12 per square foot today, according to Costar. Current industrial vacancy in the submarket sits at roughly 4 percent.
“Like most states, New Jersey is experiencing an office vacancy problem, with many employees working from home,” CBRE’s Eli Klapper said. “Working with local municipalities in the state who are rezoning their towns allows owners to transition these vacant office buildings to warehouses, which is indirectly helping both the office and industrial sectors. As clients are reducing their office footprints, owners are able to take this product off the market and demolish the buildings for industrial investors. This trend just speaks to how strong the demand is for industrial product in the region.”
Feinberg directed the transaction on behalf of EverWest, working alongside Woodmont’s Anthony Amadeo and with representation by Klapper, Kevin Dudley and Mark Silverman of CBRE. The deal marks the third transaction in New Jersey between EverWest and Woodmont within the last nine months.
In detailing their plan, the developers pointed to the property’s location less than a mile from Exit 10 of Interstate 287, which provides quick access to the New Jersey Turnpike. The existing office building on the site is slated to be vacant by the first quarter of 2022, while the firms expect to deliver the new industrial buildings in 2023.
They added that the buildings will be designed to accommodate a large single user or can be easily divided for multiple tenants.
“This investment offers a rare redevelopment opportunity of an underutilized office building in a strong submarket in New Jersey that lacks developable land,” Amadeo said. “We couldn’t be more excited to partner with EverWest on this transaction and look forward to our continued growth together.”