New Jersey’s ‘intermodal ports’ give industrial sector a boost

For decades, New Jersey developers have been recycling worn-out warehouses near the Hudson River into chic condos and fashionable retail centres. In cities like Hoboken, Jersey City and Weehawken, the value of a view of the Manhattan skyline across a mile-wide 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 the US’s.

New Jersey is a linchpin in the national supply chain of roads, 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 the 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 US$1 trillion within overnight delivery range of New Jersey, according to 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 per cent from 2000 to 2005, and 9 per cent last year, according to Frank McDonough, president of the New York Shipping Association.

Mr McDonough and other industry representatives, real estate brokers, the Public Service Electric & Gas utility company and municipal officials helped work on the iPort Initiative.

Mindy 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 centres.’

She 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,’ Ms Lissner said. ‘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 North-east, after labour strikes in the West created logjams at the ports and caused some shifts in paths of transport.’

Another reason for growth in the industrial sector of New Jersey, Ms Lissner said, is the lower rents than in New York.

New Jersey’s average industrial rents hover at US$5 to US$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 US$8.50 psf.

‘We think we can get it - especially given the sometimes ridiculous rents they’re getting in New York,’ said one official.

Ms Lissner did not sound quite as certain. ‘It depends on the individual company’s situation,’ she said. ‘If you’re faced with a US$12 per square foot rent in the Bronx, and your labour is there, and your customers, would you move toward Newark for a better and newer building, and pay US$6 per square foot? The answer is yes.

‘But would you move to Newark for a better and newer building and pay US$9 per square foot? Maybe.’

Still, she and other brokers predict an upturn in rents in New Jersey - 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.’

Source: The Business Times, 24 May 2007