A panel of experts representing real estate development, management and construction in the state were on hand virtually Tuesday during NJBIZ’s The Future of Construction and Development Panel Discussion to give viewers perspective to what is really going on in the Garden State real estate industry.
Moderated by Axiom Communications President and Founder Ron Simoncini, the discussion offered insight into the industry now, as well as what to expect moving forward in the wake of COVID-19 and uncertain times ahead.
Joining Simoncini as panelists for the Sept. 29 event were Engineers Labor-Employer Cooperative 825 Deputy Director Katie Gibbs, Grassi Construction Practice Principal Scott Stern, The Rockefeller Group Vice President of Design and Construction Michael Leondi, and Maser Consulting President and Chief Executive Officer Kevin Haney.
Simoncini dug right in, asking Leondi what he sees in the industrial world in regard to what its posture is, as well as what could be coming down the line for the general economy.
Leondi said regionally the industrial market has been strong for the better part of the last five to seven years, and was very strong going into 2020, especially in New Jersey.
What Leondi said that many people probably don’t know is how e-commerce has exploded. According to him, pre-COVID e-commerce didn’t even have 12% of marketshare in terms of total retail in the country – it would see maybe 1 to 1.5 points in year over year growth in the five to seven years leading up to 2020. But, in the last six to eight months alone, e-commerce is set to reach about 20%.
That type of growth has made New Jersey’s industrial pipeline white-hot. And many of Leondi’s larger tenants are re-thinking their supply chain after the pandemic brought about concerns that they don’t want to deal with again.
“Nobody wants to end up without toilet paper again. That put a lot of alarm bells out there for a lot of people,” said Leondi.
The conversations now being held surround coming up with strategies that include bringing segments of that supply chain to the domestic front, and if not in the U.S. then at least to North America or somewhere where ground transport will be available.
“Some of the conversations we’ve been having with our tenants and some of the other folks in the market surround what can be done to mitigate that and not let that happen again,” he added.
Haney also said he was experiencing strong momentum in the industrial market with his clients, and sees no sign of it slowing down.
In fact, he said his firm has probably taken on more in terms of workflow in the area, primarily because the demand is there and also because the workflow processes in other sectors are dropping off while industrial is becoming more prevalent.
Another thing Haney pointed out is that land perspective has come into play, and many clients are looking to flip their sites to some type of last-mile industrial space.
Gibbs piggybacked on that, stating that what happens when a market gets really dominated by one asset class is that yes, in the case of COVID there are a lot of opportunities offered, but there are also threats and policy solutions needed to mitigate them.
She said that as it becomes clear there is a project that isn’t economically viable and there is a switch, there needs to be policies to make sure that energy, transportation, water and all of those infrastructure considerations have set the groundwork to make the project thrive.
“We are a logistic state in the middle of a logistics corridor and we have to make sure we have well-maintained roads and bridges and adequate energy and water supply to supply to industrial places. Water planning can really drive where development occurs in the state,” Gibbs said. “And so we have to make sure that we as advocates are advocating for policy in those infrastructure areas that are going to marry our economic development strategies and target these market segments.”
The importance of planning was a common theme throughout the discussion.
From infrastructure to development, as the COVID pandemic has shown, it is important to plan well because no one can predict what market will be impacted by a downturn. The sector needs to look ahead and make sure that whatever various market is currently in the pipeline, that thoughtful planning is taking place in terms of policy to prepare and to make sure that these things can thrive.
As for what companies should do to when looking at how the money flows, Stern says the financial impacts of asset trend changes require figuring out what their costs and revenues are.
Especially when transitioning to a new type of asset class. Look at what the benefits are, how to transition, what’s the cost of transitioning? What are the benefits, and what are the costs to transition to a different asset class? Look at what the projected revenue will be moving forward.
“A lot of these guys were coming in, you know, with mixed-use and trying to look to see if they could add some industrial space to that. I mean, obviously, that’s what you want to do, but you also want to look into what’s the cost going to be for that,” Stern said.
And while industrial is still a hot market – and doesn’t seem to have anything in its way to stop the momentum – the panelists seem to agree that the multifamily market is also booming.
Murmurs of impacts and challenges, according to Haney, particularly in regard to transit villages, just aren’t happening and the large projects are continuing with no real demand shortage, or slow down, on either side.
Even for the ugly duckling office market, the panelists had mostly optimistic things to say.
While workers are staying away from the office do to COVID, Leondi sees it as a short-term blip. And looking forward, people needing and wanting to go to these workplaces to be together and to collaborate will come back.
Stern agreed, adding that while working virtually has been good and productive, working as a team is just not there.
“You know, if you’re on a job you’re adding a lot of our stuff. They’re … out at our clients and client’s offices, per se, you know, in their conference room in there and they’re collaborating, they’re discussing what they’re doing on the job. That type of collaboration, you lose in this in this industry,” he added.