When Tom Monahan describes how consumer habits have changed, he only needs to point to New York City — namely, to the package rooms that come as part of any new luxury residential tower.A decade ago, the rooms were a quarter of the size that they are today, he said. And the spaces are now temperature-controlled, manned by one or two employees and completely computerized.
For an industrial real estate broker, that’s all evidence of one key shift.
“What that translates to is doing retail shopping out of an industrial warehouse,” said Monahan, a senior vice president with CBRE. “Industrial, in some respects, has become the new retail.”
The power of e-commerce — and its effect on commercial real estate — was a major theme Wednesday at the 14th annual RealShare New Jersey conference. Hundreds of developers, brokers and other professionals gathered in East Rutherford for one of the industry’s largest annual events, as panelists covered everything from deal making and local land use to warehousing trends and the multifamily boom.
During a panel on industrial space, speakers highlighted a market that is the strongest it has been in decades: tenant velocity is high, rents are rising and the activity is spreading to many submarkets. They also touted a strong balance of supply and demand, a notable departure from past booms.
“By no means is it a landlord’s market, but by no means is it a tenant’s market,” said Peter Crovo, senior vice president and market officer for Prologis. “Overall, that is what a healthy economy should look like.”
The lack of space has allowed well-located building owners to raise their rents and be more selective, panelists said, but it also speaks to the challenges of finding sites for new construction. Jeff Milanaik, principal of Bridge Development Partners, said “you’ve got to be really creative to make deals happen” in core markets near New York City and Port Newark-Elizabeth.
“From Exit 10 north, we’ve got to look at existing sites, tear-downs, geotechnical issues, environmental issues — things that 10 years ago we would have shied away from because you didn’t want to waste your time and energy,” Milanaik said. “And that’s where you’re creating the value today. That’s also keeping the supply pipeline down so that it’s really pacing very well with absorption.”
Another challenge is the cost of construction. Speakers, including Crovo and Brian Milberg of Sitex Group, said the cost to build is being driven up by factors such as the increased demand for contractors and of the materials needed for modern buildings.
Combined with the time it takes to get permitted by a local government, Milberg said there are still no shortage of barriers in New Jersey.
“This is the highest cost to build than any other market,” said Milberg, a principal with Sitex. “So in New Jersey, it’s not just trouble finding the dirt, but it’s also one of the most expensive places to build a building.”
The panel, which was moderated by Richard Burrow of Langan Engineering, also included Hartz Mountain Industries Senior Vice President Ernest Christoph and Tulfra Real Estate President Sonny Jumani. It was one of four issued-base panels covered at the event at the Hilton Meadowlands.
This year’s RealShare New Jersey also began with an inaugural New Jersey Signature Developer Awards program, which honored developers who are making significant contributions to the state’s commercial real estate industry. This year’s honorees included Peter Cocoziello, CEO and president of Advance Realty; Joseph S. Taylor, CEO and president of Matrix Development Group; and Ralph Zucker, president of Somerset Development.