It may sound overly simple, but sometimes that’s the best way to get a point across.
Those of you who follow the event circuit in this industry may have heard Jeff Milanaik, a veteran developer in the state, speak about the underlying fundamentals of New Jersey’s industrial sector.
He often notes that a third of the U.S. population lives within a 300-mile radius of New York City. Then he breaks it down along these lines:
“They consume ‘stuff,’ ” a smiling Milanaik says, recognizing the simplicity of his description. “Stuff goes into warehouses — let’s not complicate what we do — and we know that isn’t going to be changing.
“Even cyclically, with ups and downs in the economy, we consume as a country. And it doesn’t have to be high-end electronics. It’s the staples — the food goods, the paper products. All of the stuff that we need to exist is stored in warehouses. That’s the basic tenet of why people feel comfortable with it.”
It’s tough to poke holes in that argument. Maybe it’s because I find myself at a supermarket two or three times a week or because of the Amazon boxes that seem to show up at my apartment almost every day. Either way, it points to what is no doubt a source of excitement for those who make a living in the industrial business: The rise of e-commerce tenants and many others who need to be close to population centers represent actual growth in New Jersey’s economy. That means new businesses, new jobs and new requirements that aren’t simply backfilling someone else’s space, given that the tenants that have been here for decades aren’t going anywhere themselves.
It’s the type of growth that brokers wish they’d see in the office market, where we often hear about the game of musical chairs or flight to quality, rather than true net absorption. But for the industrial sector, that growth has translated into rising rents, a greater feeling of certainty and an ever-tightening supply that can’t seem to keep up with the demand that’s out there.
All of which sets the stage for this month’s cover story, “Industrial Strength.” In the story, we look at the capital markets and how institutional investors seemingly can’t get logistics space into their portfolios fast enough. One big reason is that large opportunities are hard to come by. The state’s industrial owners are reluctant to give up their properties, even with the windfall they could realize from doing so. When they do sell, the buildings are trading at prices and cap rates that are exciting to even the most seasoned brokers.
This is why it was all the more striking to me when I was reporting on another story for our July issue. We sat down with executives at Hugo Neu Corp., which owns a 130-acre industrial complex in South Kearny in the heart of New Jersey’s warehouse and distribution corridor. After the site was flooded by Hurricane Sandy in 2012, the firm decided against continuing to operate it as an industrial complex for the long haul. Instead, Hugo Neu is now overseeing a 2 million-square-foot redevelopment of the site as a 21st-century hub for creative office and flex tenants. It’s an ambitious and rather unorthodox plan, but one that is seemingly off to a good start.
We have much more on those stories and other features in our latest issue of Real Estate NJ. As I’ve said before, New Jersey’s commercial real estate market is evolving as much as it might be moving through different points in the cycle. And it has translated into what seems to be a busier summer season in recent years. Here’s hoping it continues.
Thank you for reading. As always, find us online at www.RE-NJ.com and don’t hesitate to reach out with any feedback, questions or story ideas.
Enjoy the issue!
Joshua Burd
Editor
josh@re-nj.com
