Developing Ports of Many Modes
For decades, New Jersey developers have been recycling worn-out warehouses near the Hudson River into chic condos and fashionable retail centers. In cities like Hoboken, Jersey City and Weehawken, the value of a view of the Manhattan skyline across a milewide stretch of water overwhelms a site’s value as a functional place to store and repackage goods.
Nevertheless, the warehouse and distribution business has remained vital to the New Jersey economy — and indeed, the nation’s. By all accounts, New Jersey is a linchpin in the national supply chain of roadways, rails, airports and ports. It has 1.4 billion square feet of industrial real estate, the equal of the Chicago area market and surpassed only by the Los Angeles-Southern California market.
Now momentum is building to expand the industrial market further, with an emphasis on development near shipping ports. One of an anticipated new crop of “intermodal ports,” capable of receiving and distributing shipped goods by all means of transport, is being built near the loading docks in Carteret.
The Portfields Initiative, a joint project of the Port Authority of New York and New Jersey and the New Jersey Economic Development Authority, created a list of 17 brownfield sites in the state that could be cleaned up and turned into intermodal ports. The Carteret site is a former landfill, and the first such iPort under construction.
There are 60 million consumers with a collective purchasing power of more than $1 trillion within overnight delivery range of New Jersey, according to the real estate company Cushman & Wakefield, which established a national industrial brokerage division a couple of months ago.
In recent years the amount of cargo moving through the New York-New Jersey waterfront has risen rapidly — 57 percent from 2000 to 2005, and 9 percent last year, according to Frank M. McDonough, president of the New York Shipping Association.
Mr. McDonough and other industry representatives, real estate brokers, the Public Service Electric and Gas utility company and several municipal officials helped work on the iPort Initiative. The group is also working jointly on efforts to promote the 17 sites for development.
Mindy S. Lissner, an industrial real estate specialist with CB Richard Ellis, said, “The iPort Initiative provides various types of support to developers taking on these sites, some of which are current landfills or former industrial sites that may be contaminated, and turning them into state-of-the-art distribution centers.”
Ms. Lissner worked on the initiative, and her company is now seeking tenants for the Carteret distribution center, which is being built on speculation, just off Exit 12 of the New Jersey Turnpike.
At the 132-acre Carteret site, before construction could begin, a way had to be devised to remove, treat, replace and cap 600,000 cubic yards of waste from three landfills.
“It was a huge project that involved relocating creeks and devising ways to control rainwater runoff that would be environmentally appropriate,” said Jim Murray, a principal of the Panattoni Development Company of California, which is a partner with P/A Associates of New York in building the iPort 12 Trade and Logistics Center, as the complex is formally known. “It’s certainly not something that would be happening now without the concerted efforts of a lot of people to get things going.”
His company received grants and technical support for site work, Mr. Murray said. The first of two buildings at iPort 12 is nearing completion, and construction of the second will probably begin later this year, he said.
KSS Architects was brought in to create structures with “the most up-to-date and best of everything,” according to Mr. Murray. The structures will have 36-foot ceilings, and only four interior columns, allowing for maximum flexibility in using space. The first building is to cover 1.06 million square feet, and the second, 200,000.
In this era of high security, some companies may want to install fingerprint recognition systems or other security measures, and the structures have been designed with this in mind, the developer added.
Ms. Lissner of CB Richard Ellis said iPort 12 was singular among properties on the market in the region, because it offers a state-of-the-art structure combined with proximity to a port, rail lines, Newark Liberty International Airport and also Manhattan. It also offers the benefits of urban enterprise and foreign-trade zone status, providing tax breaks on goods moved through its doors, as part of the iPort Initiative.
“There are two big things driving growth in the industrial sector right now,” said Ms. Lissner. “The first is that as the country shifts from manufacturing to a service economy, more and more products are being imported. And they are increasingly entering through the Northeast, after labor strikes in the West created logjams at the ports, and caused some shifts in paths of transport.”
Another reason for growth in the industrial real estate market of New Jersey, Ms. Lissner said, is the lower rents than in New York.
New Jersey’s average industrial rents hover at $5 to $6 a square foot annually, compared with something more than twice that in New York, according to brokers. The asking rent at iPort 12 will be $8.50 a square foot, Mr. Murray said.
“We are basing that on the building’s quality and its location,” he said. “We think we can get it — especially given the sometimes ridiculous rents they’re getting in New York.”
Ms. Lissner did not sound quite as certain. “It depends on the individual company’s situation,” she said. “If you’re faced with a $12 per square foot rent in the Bronx, and your labor is there, and your customers, would you move toward Newark for a better and newer building, and pay $6 per square foot? The answer is yes.
“But would you move to Newark for a better and newer building and pay $9 per square foot? Maybe.”
She and other brokers predict an upturn in rents in New Jersey over all, however — unless the many iPort projects all come to fruition in a relatively short period of time.
“If all the construction gets built,” she said, “that could flood the market with space and exert downward pressure on rents.”
By ANTOINETTE MARTIN