Industrial Is New Jersey’s ‘Good News’ Sector
NEWARK—Gary Gabriel from Cushman &
Wakefield may have been among the first to
sound the mantra: “Industrial is the new
multifamily” when he spoke of the sector’s
burgeoning strength at a recent RealShare
breakfast in Newark. There is a rising chorus from various analysts, however.
In a Q1 report, Cassidy Turley said the
market is continuing to “gather steam,” with
679,329 square feet of absorption and
growth for the second continuous quarter.
The report adds to the positive reviews the
state’s industrial market has been getting
lately, noting “stellar” leasing in the
Meadowlands and a 5% drop in vacancy at
Exit 12 of the New Jersey Turnpike.
Overall vacancy for Northern and Central
Jersey declined to 7.5%, from 7.7% at the
end of 2012. Meanwhile, the average asking
rental rate of $5.75 per square foot has
steadily increased since the first quarter of
2011, when they slumped to $5.61 per foot.
More plaudits came from Cushman &
Wakefield. “Demand has intensified, especially in the northern counties, where the
Meadowlands and Port submarkets combined for more than a million square
feet—nearly half—of the state’s total
absorption” during Q1, says Gil Medina,
C&W’s executive managing director.
There were 15 deals made for 100,000
square feet or more during the first quarter,
which Tri-State research director Jason S.
Price tells GlobeSt.com amounts to about
half of all the deals. That level of activity
effectively erased the addition of nine
100,000-square-foot parcels to the market
during the quarter.
Sales activity was also strong for the quarter. C&W reported that seven million square
feet of industrial property was traded.“ For
context, 12. 8 million square feet was sold in
all of 2012,” says Price.
Industrial constitutes the hottest property sector right now, said Kevin Welsh, SVP
with CBRE, at the RealShare breakfast. He
particularly favors the Meadowlands, followed by the port markets and the Exit 8A
submarket. Welsh noted that rents have
been appreciating significantly along the 8A
corridor, which usually is the last to recover.
Institutional players, while remaining
strong in multifamily, have become more
active with industrial buys, Welsh said. The
lure of the Turnpike corridors is one factor,
but so is the capital-intensive nature of office,
traditionally an institutional mainstay.
Residential Building Banned on NJ Waterfront
On Dec. 15, 2012, in the wake of Hurricane Sandy, the Federal Emergency Management
Agency issued a new set of Advisory Flood Insurance Rate Maps for the New York and New
Jersey coastal area. FIRMS are the official depiction of flood hazards for each community
and the properties located within it. Since many of the existing FIRMS for this area were
more than 25 years old, the purpose of the newly released AFIRMS was to provide an
updated set of maps to support Sandy reconstruction efforts.
The maps were originally scheduled for release in 2013, but FEMA accelerated their
release so that rebuilding at the coastal shore areas could be done in accordance with
more recent flood elevation data.
FIRMS are used to determine national flood insurance program
requirements and to indicate where state or local floodplain development regulations apply in a given
community. Each FIRM shows
the areas subject to flooding by a
storm or flood event that has a 1% chance of being equaled or
exceeded in any given year. The highest risk areas are designated on
the FIRMS as A Zones and V Zones. V Zones are areas along the coast
that are subject to inundation by the 100-year flood and three-foot
breaking waves. Virtually the entire Hudson River waterfront area in Hudson County is
newly designated as a V Zone on the AFIRMS.
FEMA acknowledges that the AFIRMS are merely advisory and will not form the basis
for the NFIP until they are final and officially adopted. The agency anticipates issuing
more thoroughly developed “preliminary” maps in June.
Notwithstanding that the AFIRMS are merely advisory, on Jan. 24, 2013, the New Jersey
Department of Environmental Protection adopted an emergency rule formally incorporating the AFIRMS into New Jersey’s Land Use Regulation Program. Pursuant to pre-existing coastal zone regulations, all residential development is prohibited in V Zones and
commercial development is discouraged. Hence, all residential development on the
Hudson River waterfront is prohibited and commercial development discouraged as a
consequence of the emergency rule.
By hastily adopting the AFIRMS into state law only days after their publication, without
considering either their accuracy or their impact on other regions of the state, NJDEP has
inadvertently done great damage to the expanding urban waterfront in Hudson County.
In Jersey City alone, 5,658 units of affected residential development have already been
approved and 10,554 more have been planned. Obviously, this ban on development would
create a significant financial hardship on urban waterfront developers who have invested
billions of dollars in land and permitting costs.
Yet it seems unlikely that New Jersey’s pro-business administration intended to bring
development in this part of the state to a screeching halt. After holding a public hearing
and receiving 185 written comments from the public, NJDEP on March 25 adopted the
emergency rule with no changes as a final rule. Only time will tell whether the harshness
of these rules is ameliorated by a significant reduction of Hudson County V Zone designations on the next set of FIRMS or a later amendment for the Hudson River waterfront area
from the blanket ban on residential development in the V Zone.
(This column originally appeared in slightly different form on GlobeSt.com.)
By Marilynn R. Greenberg
Marilynn R. Greenberg is a partner at Riker Danzig, Scherer, Hyland & Perretti LLP. She may be
contacted at email@example.com. The views expressed here are the author’s own.
Vital Signs... Washington, DC metro apartment rents could fall as much as 2% this year.—Delta Associates