Woodbridge, N.J., Feb. 16, 2017 - Cushman and Wakefield's industrial specialist Stan Danzig, executive vice president of commercial real estate in East Rutherford, NJ, moderated a panel discussion at Mid-Atlantic Real Estate Journal's (MAREJ) 2017 Industrial and Economic Development Summit. The conference, held at the APA Hotel Woodbridge in Iselin, NJ, analyzed key areas shaping the future of industrial real estate. The initial panel moderated by Danzig examined opportunities and the present state of the market. A second discussion assessed trends in transportation and logistics impacting warehouse development and investor interests. Larger issues affecting redevelopment and development including local government policies and protocols were examined during the final discussion.
The participants of the panel Danzig moderated were: Brian Banaszynski, principal at Heller Industrial Park; Jose Cruz, senior managing director of HFF; Jeff Milanaik, Principal Bridge Development Partners, LLC; and Kevin Walsh, managing director, CBRE.
The initial roundtable exchanged ideas about vacancy, absorption, rental rates and new construction. Experts agreed New Jersey's low supply/high-demand is driving a bullish market and the ability to charge premium rates per square foot. According to participants, once industrial space is secured, investors/owners need to devise strong strategies for tenant mixes to ensure profitability since high costs are hard to pass down. Banks are more lenient for prospective developers knowing investors are paying premium rates for IRE space.
When Will The Positive Surge in IRE Reverse?
"The health of the industrial real estate market continues to be strong, but for how long?" said Danzig. "In the wake of a new Administration, we need to examine any significant changes internationally, and its impact on our economy."
Assessing when the upward trend in IRE would change was the prevailing question among panelists. In response, everyone agreed growth would continue through 2018. Experts attributed the market strength to New Jersey's strategic location for conducting business and the surplus of domestic and international capital willing to invest in the limited available IRE inventory. China, Israel, Germany and Russia were cited as countries with heightened investor interest. Coupled with this fact, panelists agreed the FED would not substantially raise interest rates in 2017.
The Impact of the New Administration's Trade Policies
The next topic explored was how the new administration's trade policies would impact four years of positive absorption in the IRE market. Panelists agreed imports are essential for last mile distribution. Additionally, participants believed American companies are going to continue outsourcing for production of goods and services rather than increase domestic manufacturing. The reason for US businesses to continue partial international outsourcing is due to cheaper labor costs which in turn insulate profit margins from shrinking.
Armed with strong import/export synergy, Danzig queried the robustness of the e-commerce industry. The group cited strong opportunities for commercial real estate brokers finding building specifications to suit investor's needs. Since big-box retailers are increasing, larger buildings are needed to house products and automated pick and pack technologies.
NJ Industrial Real Estate GOLD COAST
Industrial real estate experts acknowledged the Gold Coast for available inventory remains on the NJ Turnpike, from Exits 6A through 13A, at the Elizabeth seaport. Speakers said the hallmark of Exit 6A is Amazon's new home in Florence Township in the Garden State. In the shadow of the Philadelphia metropolitan area, they stated the distribution center fulfills multi-state retail demand.
The areas of Bordentown/Trenton; Highwood/Freehold and Cranbury/Jamesburg were cited as emerging growth areas for IRE space. "Sometimes you have to trade-off the design aesthetic for suitability to serve a large parking footprint," stated Banaszynski of
Heller Industrial Park. Another sacrifice made for business' speed to market goals was the forfeiture of NJ state incentive progams.
Strong Collaboration With Local Governments
Danzig drove the discussion to municipalities' receptiveness towards new IRE goliaths moving in. Experts provided insight that there is a reduction in Department of Environmental Protection's staff at local offices, and the need to factor delays in permit processing. Additionally, panelist stated they advised clients to be sensitive to residents' concerns about increased traffic patterns and the necessity to form positive alliances with the communities of which the businesses reside in.