NEW BRUNSWICK— Scarcity in virtually all industrial property classes is making tenant concessions shrink and pricing rise, said members of the Industrial Leaders panel at RealShare New Jersey last week.
“There is a tremendous push for office property classes which has led to lower vacancy rates across markets,” says Jordan Metz, vice president of Bussel Realty Corp. “2013 was a banner year. Everyone was riding the train and anticipated that it would continue.”
July and August, usually regarded as the “doldrums of summer,” were “incredibly busy,” said David Iacobucci, managing director, Woodmont Industrial Partners. “There's disappearing tenant concessions, and tightness we haven't seen since 2006.”
According to Marc Petrella, senior managing director of Cushman & Wakefield New Jersey, the firm saw 8.7 million square feet of positive absorption in 2013, and 5.8 million square feet more so far this year. “There is single digit vacancy in all of the Turnpike submarkets, with the 8A submarket around 6.7% in the second quarter, the best level since 2004,” Petrella says. “The market is tight, healthy, and in terms of acquisition, a lot of money is chasing very little product.”
Despite the market tightness, tenants are still seeking favorable lease terms and concessions, says William Waxman, executive vice president, CBRE. “Every company wants flexibility, nobody wants to commit anything today,” he says.
“The one surprise seems to be a disconnect between what users want and what owners want to give in terms,” says Iacobucci. “That's our biggest challenge. Tenants want to quote a 3-5 year deal and $7 a foot in concessions.”
“At the bottom of the market in 2008, 2009, and 2010, stronger tenants wanted to go low and long, pushing for 10-15 year terms,” says Petrella. “Now they see upward pressure, so the guys who didn't want to lock up space for long period are now looking at longer deals.”
Logistics firms are also rethinking the location of their distribution centers, panelists said. “The last mile is a huge issue in logistics these days,” says Waxman. “The most expensive part of the cost is transportation, that's 62% of the cost of running a warehouse. Companies are saying they need to be where the population is, so PeaPod and Amazon are in Jersey City instead of Carteret, to be closer to the population.”
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Steve Lubetkin
Steve Lubetkin is the New Jersey and Philadelphia editor for GlobeSt.com. He is currently filling in covering Chicago and Midwest markets until a new permanent editor is named. He previously filled in covering Atlanta. Steve’s journalism background includes print and broadcast reporting for NJ news organizations. His audio and video work for GlobeSt.com has been honored by the Garden State Journalists Association, and he has also been recognized for video by the New Jersey Chapter of the Society of Professional Journalists. He has produced audio podcasts on CRE topics for the NAR Commercial Division and the CCIM Institute. Steve has also served (from August 2017 to March 2018) as national broadcast news correspondent for CEOReport.com, a news website focused on practical advice for senior executives in small- and medium-sized companies. Steve also reports on-camera and covers conferences for NJSpotlight.com, a public policy news coverage website focused on New Jersey government and industry; and for clients of StateBroadcastNews.com, a division of The Lubetkin Media Companies LLC. Steve has been the computer columnist for the Jewish Community Voice of Southern New Jersey, since 1996. Steve is co-author, with Toronto-based podcasting pioneer Donna Papacosta, of the book, The Business of Podcasting: How to Take Your Podcasting Passion from the Personal to the Professional. You can email Steve at [email protected].
