Duke Realty Corp. is now delivering a two-building, 1.25 million-square-foot industrial development at 225 Elm St. in Perth Amboy. Known as the Steel Run Logistics Center, the property is preleased to Home Depot. — Courtesy: Duke Realty
By Joshua Burd
Ben Rosen didn’t join Duke Realty Corp. until late 2016, but he knows full well the importance of the company’s three-building, 1.1 million-square-foot industrial park that broke ground more than two years earlier.
The complex, the Legacy Commerce Center in Linden, marked Duke Realty’s first development in the booming New Jersey market. Equally important — the speculative project was met with the type of interest that a developer could only hope for, drawing the likes of Blue Apron, Wayfair and others that occupy the site today.
“They got a taste of the demand in New Jersey and that led to an increased focus here of resources and personnel,” said Rosen, the company’s vice president of development and leasing in New Jersey. “And when I joined it was very much in growth mode and we’ve been very busy growing since then.”
That focus has paid off for Duke Realty, an Indianapolis-based real estate investment trust that owns 155 million square feet of logistics space nationwide. The company over the past five years has built its New Jersey portfolio to nearly 8 million square feet, with a roster of well-known tenants and a collection of modern industrial buildings along the New Jersey Turnpike corridor.
The REIT is now poised for further expansion here — with industrial demand only heightened by the pandemic — as it moves ahead with several high-profile developments. In Perth Amboy, it’s now delivering a two-building, 1.25 million-square-foot complex that is preleased to Home Depot. It also recently broke ground at 150 Old New Brunswick Road in Piscataway, the site of a planned 622,230-square-foot property that it expects to deliver early next year.
“In a highly competitive market, we’re proud of what we’ve been able to do,” Rosen said.
Founded in 1972, Duke Realty has moved in recent years to expand beyond the Midwest and to focus primarily on industrial space in top-tier coastal markets. The company made its first foray into New Jersey in 2013, purchasing three buildings in Cranbury and Logan Township with a combined 1.3 million square feet. Over the next three years, it successfully developed and leased the 60-acre Legacy Commerce Center on Route 1&9 in Linden, opened a Northeast office in Conshohocken, Pennsylvania and hired Rosen as its first “boots on the ground” in New Jersey, as it eyed continued expansion in the state.
Those steps gave way to a blockbuster deal in late 2017, when the company agreed to acquire nearly 2.3 million square feet across six buildings in New Jersey from Bridge Development Partners, along with two development sites that would yield another 855,000 square feet. The nearly $700 million deal, which also included sites in Southern California and South Florida, was a key step toward establishing Duke Realty as a major player in the state.
“That was a game-changer for us,” said Rosen, who is based in the REIT’s Jersey City office. “They were well-located assets along the New Jersey Turnpike that gave us an opportunity to grow and hit the ground running, both on development and acquisitions, with all very good, quality properties.
“Those buildings are all fully leased and we’re very happy with that transaction as we look back three years.”
The company has since focused primarily on development in New Jersey, as it looks to do across its footprint. Its other signature transaction in the state, the Steel Run Logistics Center in Perth Amboy, is a build-to-suit for Home Depot that was several years in the making and announced last year. The two-building, 1.3 million-square-foot complex at 225 Elm St. is just about complete and will mark the revitalization of what was an abandoned, contaminated steel mill property.
“From a lifecycle perspective, some of these old industrial sites that have a long, storied history for manufacturing going back over a hundred years are now coming back as industrial sites, but from a distribution perspective,” Rosen said, noting that the acquisition from Bridge included a three-building, 1.3 million-square-foot development that was also in Perth Amboy.
“It’s a really well-located town from a distribution perspective, the labor is really strong locally and it was a pleasure working with the local government and the mayor to get the project and get Home Depot completed, so we’ve been very happy with our success there.”
Art Makris, Duke Realty’s senior vice president of the Northeast region, noted that the company is a developer first because “we find more value creation” with ground-up projects, while using acquisitions to supplement those efforts and grow its funds from operations. Developing in New Jersey is no easy task due to the scarcity of land, acquisition costs and other hurdles, but he said his team is “bullish on the rent growth and we continue to see it in the market.”
He added that the REIT’s ability to secure those opportunities hinges on local relationships.
“We rely a lot on our broker partners and we want to be very broker-friendly. We know that they’re our lifeline,” Makris said, noting that those relationships begin with Rosen and Caitlin English, a leasing representative in the New Jersey office.
Also key is the ability to leverage Duke Realty’s national platform, which comes with a strong brand, track record and a long list of well-known tenants that it has worked with in other markets.
“It’s catapulted us and allowed us to continue to grow faster with additional velocity,” Makris said. “And our platform, with our debt rating, our access to capital, allows us to compete in the Northeast, especially in New Jersey, on some of these sites we’re looking at.”
The company recently shifted its New Jersey and Northeast operations to a newly opened office in downtown Jersey City. Located in the Harborside section, the site provides easy access to a portfolio that spans Newark, the Meadowlands, Woodbridge and other top submarkets.
Rosen added that the office’s “dynamic location” can help Duke Realty attract new talent — not that the company has been able to enjoy the new space in recent months. The COVID-19 outbreak has forced the REIT to work remotely for much of 2020, although both he and Makris noted that their team has managed to stay productive and maintain their momentum of the past five years.
That’s no surprise, given that the crisis has accelerated e-commerce adoption and the overall need for modern logistics space.
“When the pandemic first occurred, everybody was looking around and trying to figure out what effects it would have on the market,” Rosen said. “And I think we’re beyond that now and we’re full steam ahead.”