The Port of New York and New Jersey, the largest port in the East Coast of the United States, has long been a conduit to economic growth for the two states that it straddles.
The area, which is composed of marine terminal facilities Port Newark, Brooklyn-Port Authority Marine Terminal, the Red Hook Container Terminal, the Howland Hook Marine Terminal, the Port Jersey Port Authority Marine Terminal and the Elizabeth-Port Authority Marine Terminal, may be in for rosier times, with economic activity expected to swell due to the expansion of the Panama Canal.
The facility’s fortunes rest on its appeal as a distribution center for online shoppers located within a 24-hour drive. However, one segment of the warehouse market continues to grow, threatening to overhaul the area’s reputation.
According to Frank Giantomasi, a member of the Real Estate, Development and Land Use Group of law firm Chiesa, Shahinian & Giantomasi, the port is housing an increasing number of cold storage facilities.
“We’re seeing an enormous demand for freezer warehouses,” he said. “We’re seeing clients looking for warehouse space down at Exit 3 and 4 of the Turnpike. We’re almost as far away as Philadelphia. But what’s happened is, there’s an enormous amount of food products and perishables that’s coming in from Asia and South America and then landing here in the Port of New York and New Jersey. The food products: juice concentrate from China, shrimp from the Philippines or squid from Vietnam. We’re seeing all sort of stuff coming in here. It’s got to be frozen. It’s got to be refrigerated.”
There’s hardly any data that tracks activity in the New Jersey cold storage market. However, some adjacent figures support Giantomasi’s claims.
According to the Department of Agriculture’s Capacity of Refrigerated Warehouses report from January 2016, New Jersey ranked ninth in the country with 168 million cubic feet of gross refrigerated space. Meanwhile, according to data from the Global Cold Chain Alliance and the International Association of Refrigerated Warehouses, the total refrigerated capacity in the US grew by three percent to 4.17 billion cubic feet from 2013 to 2016.
Giantomasi, who is currently involved in three freezer warehouse projects in the state, said that he is seeing more large transactions. “It’s not like a freezer warehouse that’s, you know, 10,000 square feet. We’re talking about an acre, two acres of freezer warehouse in one building. That’s a lot of square footage,” he said.
The strength of cold storage facilities is just one component of an increasingly robust New Jersey industrial real estate market. According to Transwestern Managing Director Alex Previdi, dougle-digit rents are now becoming more common in the state.
“Industrial tenants are flocking to New Jersey as a shift in trade volume to the East Coast is increasing the demand for an already constrained supply,” Previdi said. “Double-digit rents are becoming more common in New Jersey, allowing landlords to continue to recover losses from the most recent recession.”
According to Transwestern’s Fourth Quarter 2016 Industrial Market Report, the average asking rent for industrial space grew to a record $6.73 per s/f. It was the fourth consecutive quarter of record highs in the state. Asking rents also grew in 24 of New Jersey’s 25 submarkets on a year-on-year basis.
“Activity is especially pronounced in central New Jersey, which accounted for 60 percent of the annual absorption and the market’s top five fourth-quarter leases,” said Matthew Dolly, the firm’s New Jersey research director. “Also, while it’s not discussed nearly as much as the Turnpike corridor, New Jersey’s Interstate 287 corridor has proven to be critical to the health of the state’s industrial market.”
The most active portion of the New Jersey’s industrial real estate market was home furnishings. During the fourth quarter, the biggest transactions were Modway Furniture’s 635,000 s/f lease in East Windsor and Crest Home Furnishings’ 360,000 s/f lease in North Brunswick.