Page 20 - RE-NJ

18 SUMMER 2024
THE WAITING GAME
Industrial tenants delaying lease decisions amid capital concerns, despite demand for new space
By Joshua Burd
Industrial tenants are still yearning for the types of modern, high-end logistics spaces that have flooded
the market in recent years. When they may actually sign a lease is not nearly as certain.
That was a key takeaway from NAIOP’s I.CON East conference in early June, where developers said they were grappling with indecision by occupiers that remain cost- conscious in the near term and watchful of longer-term issues, such as the availability of power. That has tempered some of the enthusiasm among builders and investors that are otherwise bullish on the asset class, sensing a rebound from the market’s recent pullback.
“I think demand is returning, but
the decision-making and capital investment is the constraint at this point,” said Brandi Hanback, an executive vice president and co-head of development with Rockefeller
Group. “So it’s going to take time.”
The developer has seen an uptick in touring
the two-day conference at the Hyatt Regency Jersey City, speaking during a June 6 panel focused on the East Coast industrial market. The event took place as New Jersey and other top regions navigate a surge in new vacant warehouse deliveries — many of which broke ground at the height of the market in 2020 and 2021 — coupled with tenant activity that has moderated from the pandemic.
That has caused vacancy in northern and central New Jersey to hover around 5 percent this year. For instance, CBRE said the region in the second quarter saw both 5.9 million square feet of leasing activity and 2 million square feet of new space hit the market via new construction.
Yet Hanback and other panelists at I.CON East were optimistic about the market, arguing that the softness stemmed from tenants’ concerns about capital spending rather than fundamentals.
“I think sometimes it’s important
to bifurcate those two,” said Emily Cannon, chief investment officer of Atlanta-based Dogwood Industrial Properties. “We
still all really
like industrial,
and there are
tailwinds in
industrial. It’s a
good business,
even with the
amount of supply
coming online.
It’s going to be a big jump by the end of this year, but it’s still historically a very good occupancy number for our business. So I see light winds in our sails.”
Landlords are buoyed by what they say is an increasingly active tenant pool. The specific type of user depends on the region, they said, but those companies hail from industries such as ecommerce, food and beverage,
Brandi Hanback
activity and lease proposals, she said, but prospective tenants are still taking anywhere from two to four weeks to respond.
“So it’s very slow, and I think that’s deliberate and tied to the decision- making and the tension internally between ops and planning and
the C-suite and capital investment (decisions),” she added. “So when we see some of capital markets normalize, I think some of those decisions will get unlocked and we’ll start to see transactions increase.”
Hanback was among the many executives who weighed in during
Emily Cannon