We assembled a panel of industry experts to tackle this month’s question.
Here’s what they had to say.
Noah R. Balanoff, executive managing director, Colliers International (Parsippany)
U.S. e-commerce sales now represent 8.5 percent of total retail sales. The northern and central New Jersey industrial markets have benefitted directly from this tech-driven phenomenon. E-commerce and traditional retailers looking to capitalize on omnichannel opportunities and the logistics organizations that serve them are drawn by the state’s dense population and our accessibility to New York City and all points on the Boston-to-Washington, D.C., corridor.
The New Jersey industrial market saw a total of 11.4 million square feet in leasing during the first quarter, a level 13.2 percent higher than the five-year quarterly average. Innovation within the industry is also driving new development, as warehouse/distribution users seek modern facilities that can accommodate their increasingly automated operations.
In the first three months of 2017, six new industrial projects totaling 2.5 million square feet broke ground, bringing the total construction pipeline to 12.9 million square feet in 37 properties.
Scott Perkins, managing director, corporate services, NAI James E. Hanson (Hackensack)
Often, when one thinks of a warehouse or distribution center, the last things that come to mind are technology, creativity and innovation. E-commerce users are rapidly changing that mindset and what they are doing inside of industrial buildings is powering the hot industrial market across the state.
Previously, companies would tailor their operations to existing industrial buildings. Today, as companies like Amazon and Boxed.com refine their distribution operations to maximize efficiency and speed, they are seeking warehousing and last-mile distribution facilities built exactly to their specifications.
Automated robotic fulfillment operations and the speed at which products are being moved into and out of their facilities require features such as 40-foot clear ceilings and cross-dock-oriented spaces. These requirements have caused the spike in rental rates for spaces built along these lines and the explosion in development of these types of properties in markets along major transportation arteries.
It is obvious that technology, creativity and innovation on the part of e-commerce users will continue to power the direction of the New Jersey industrial market well into the future.
Blake Chroman, principal, Sitex Group (Englewood)
Technology and innovation are the primary drivers behind the surging New Jersey industrial real estate market. E-commerce has fundamentally transformed the way consumers shop. Companies involved in e-commerce and “last mile logistics” have had to move quickly to secure warehouses in strategic locations throughout the state.
As a result, many of the recently completed new construction projects have been leased to companies involved in e-commerce and logistics. These companies are utilizing technology to optimize and automate their supply chains and warehouses in order to accelerate delivery and improve customer service.
Craig Engelhardt, corporate managing, director, Savills Studley (Hackensack)
One of the key drivers in demand for industrial space has been the evolution of the consumer goods supply chain. Not long ago, product typically flowed from vendors or ports into a warehouse before being delivered to a retail store in a mall. That flow has morphed dramatically due to innovations in customer interaction and points of sale. The result is a diminished reliance on a traditional retail footprint and a shift of inventories upstream back into a distribution center. Tenants taking large blocks of industrial space today are e-commerce retailers of all types, including perishable food companies. The warehouse is the last stop before products reach customers, who now expect incredibly fast delivery of their orders. To meet these customer expectations, there have been great advances in supply chain planning — but there always will be a need to have inventory close to population centers such as northern New Jersey.