Industrial Developers Look Elsewhere as Port Activity In Northeast Reaches Eye-Popping High

Port activity in the Northeast ticked up by 16.1% in 2021, and a lack of available warehouse space has led to sky-high industrial rents in nearly every market across the US.  The Ports of New York and New Jersey have both seen demand skyrocket as disruptions continue near the Ports of Long Beach and Los Angeles on the West Coast, with volumes rising in what CBRE calls an “unprecedented spike.” Rent growth in those ports has increased 33.1% year-over-year, fueled by retail, e-commerce, and third-party logistics users.

But developers, hemmed in by a lack of available developable land, are increasingly looking elsewhere.

“The lack of warehouse space near our ports in the Northeast has prompted occupiers to look for space in markets such as Southern New Jersey and Eastern Pennsylvania,” said Thomas Monahan, a vice chairman at CBRE. “This has resulted in new projects to meet this growing demand, but it’s clear that even the new construction will not be enough. Our research shows that demand will continue unabated throughout 2022, far outstripping supply.”

Expanded demand in the corridors of New Jersey and Pennsylvania with port access off I-95 and I-78 has resulted in significant absorption of existing space and extensive new construction projects, which has allowed for inventory growth. Most of the new industrial construction is concentrated in the Philadelphia metro and PA I-78/I-81 corridor markets, which are gaining more occupier and investor interest, according to CBRE data.

 “We have never before seen dynamics like these play out in the market—insatiable consumer demand, booming port activity and a dearth of available industrial space throughout the Northeast,” Monahan said. “While 58.5 million square feet of industrial space is under construction in the region, most of which is already pre-leased, only 6.5 million square feet is in port-adjacent submarkets.”