By Joshua Burd
When Bill Waxman began to see a flurry of Brooklyn-based businesses look for industrial space in New Jersey, he and his colleagues considered the obvious reasons for all of the activity.
The companies had opted to sell their properties and reap a financial windfall from the booming real estate market in the outer borough.
And with the difficulty and expense of building new facilities elsewhere in New York City, the Garden State seemed like the natural choice.
As it turns out, that was only partially true.
“(Many of them) said, ‘We wanted to expand in New York but we can’t afford it, so we have to look elsewhere. So we’re going to keep our presence in New York and expand into New Jersey,’ ” said Waxman, an industrial broker and executive vice president with CBRE Group Inc. “That was what was surprising to us.”
Whatever the reason, the trend is adding to the already surging demand in New Jersey’s industrial market. Companies from Brooklyn and New York City’s other outer boroughs are increasingly taking space west of the Hudson River, brokers say, whether they are expanding beyond their original business locations or looking for a new home altogether.
“Industrial buildings in New York are getting rarer,” Waxman said. “They’re extremely expensive, so companies are faced with a decision as to what to do next.”
New Jersey is a considerably cheaper option, even though industrial rents have swelled in recent years. Even in submarkets such as the Meadowlands — where well-located, high-end buildings can command rents above $10 per square foot — Waxman said tenants can end up paying less than half of what they shell out for an older building in Brooklyn.
Farther down the New Jersey Turnpike, that gap becomes even wider. According to CBRE, average asking rent for the first quarter was $6.42 for all of northern and central New Jersey.
Those savings have no doubt led companies such as Union Beer Distributors, which is based in the Williamsburg section of Brooklyn, to lease about 303,000 square feet at 46 Meadowlands Pkwy. in Secaucus late last year. Other companies have found their space through acquisition: The owners of Trans-Packers Services Corp., a packaging company, acquired a 95,483-square-foot warehouse in Piscataway earlier this year with the goal of relocating the business from East Williamsburg.
“The number of people coming out of Brooklyn in the last couple of years is more than it’s ever been,” said Tom Vetter, a senior vice president with NAI James E. Hanson, noting that others are still in the market or at least weighing their options. “Whether we ultimately make deals with them or not, there’s a significant increase in the number of people from Brooklyn that are coming to look.”
Vetter, whose firm has been involved in several recent deals in which tenants are moving from Brooklyn and the Bronx, said “the migration from New York to New Jersey is nothing new.” But he believes it is “magnified, enhanced and more pronounced right now” due to rising property values in the borough and to the growth of industrial users who are looking to incorporate e-commerce into their business.
Add in the fact that even older, built-out markets such as North Jersey can offer an upgrade from aging industrial space in New York City. That means a chance to have better amenities, such as higher ceilings, off-street parking and more efficient loading areas — all at lower rental rates.
The opportunity is part of the focus for economic development officials in northern New Jersey. Joanne Cimiluca, the director of the Bergen County Division of Economic Development, said her office has taken steps to reach businesses in Brooklyn such as advertising in New York City media outlets. The agency has also launched a new website aimed at helping brokers and other site selectors learn about Bergen County and navigate their space options.
“Even though there’s chatter that they’re coming in, we’re not really trying to react to it as much as we’re trying to be proactive, creating these tools and these pieces so that Bergen County gets a second look or third look,” Cimiluca said.
Waxman also noted that, by comparison, accessing parts of Manhattan can be easier from New Jersey than it is from Brooklyn or the Bronx. The same could be said for tenants that are leaving Long Island for New Jersey, which he has also seen recently.
On the flip side, he said, leaving the five boroughs means losing the subway as a mode of transportation for a company’s labor pool. Waxman added that firms that move to New Jersey are at risk of losing many of their longtime employees.
“(If) you’ve been in New York for a long time, they do lose a lot of their existing labor market, but New Jersey has wonderful labor,” Waxman said. “Nobody likes to do it, nobody wants to do it, but the reality is that it happens.”
That may in fact be the case for B&H Photo, a New York City electronics and photography retailer that is making an even bigger jump in order to support its growing e-commerce business. After unsuccessfully searching for a new location near its existing facility in Brooklyn, the company has leased a new 577,000-square-foot fulfillment center in Florence Township.
Announced earlier this year after a search with JLL, the deal will take B&H to Burlington County, nearly 75 miles from its current warehouses in the Brooklyn Navy Yard.
“The Navy Yard has been good to us and we wish we could have moved to a bigger and better facility right around the corner, but such a facility just doesn’t exist,” Jacob Mittelman, the company’s vice president of operations, said in January as he announced the move. “We are confident this move is the right one to ensure the continued growth of our business.”