2C — May 26 - June 8, 2017 — Industrial / Distribution Centers — M id A tlantic

Real Estate Journal


I ndustrial R eal E state & D istribution C enters By Anthony Amadeo and Matthew Crocker E-Commerce transforms NewJersey/Lehigh Valley industrial sector into extraordinary growth cycle I by year’s end in Eastern PA and Northern NJ. a day’s trip. This has been a major driver for the region given its prime location to such n today’s e-commerce era, when consumers or- der online, they expect

need for new and improved in- frastructure projects to begin and to be completed over the next 3 years. We estimate over $130M in highway improve- ments coupled with $140M in Transit and $180M in Bridge work to be undertaken in the region. The two primary forces driv- ing this vibrant market are consumer expectations and geography. As noted above, e-shoppers are expecting and demanding expedient delivery. Millenni- als are leading this push as they are ordering the majority of their needs on-line putting major pressure on traditional brick and mortar stores. The first quarter on 2017, we saw close to 10 major retailers close shop and file bankruptcy in large part due to this trend. E-shoppers have been perma- nently influenced by the high level of service Amazon has es- tablished with its prime busi- ness. Zeroing in on products that can be easily shipped, a wide spectrum of competitors are adopting business models that equip them to immedi- ately process orders and ship items out. Major firms such as Walmart are re-configuring their business models to ac- commodate this trend. A closer examination of the region reveals the following: Meadowlands/Exit 10/Exit 8A: Recently,this area seems to be garnering the most at- tention in terms of leasing velocity and new construction. Already in 2017, Amazon and Target have pre-leased more than 1.5 million s/f in this submarket. Meadowlands: Entrepre- neurial users and third-party logistics (3PL) firms are ser- vicing high-appetite popula- tions in New York City and Northern Jersey. Owners are attracting significant rent premiums from companies committed to making multiple trips daily. High rents in the boroughs of New York City also are stimulating inflow. Port Elizabeth/Newark: The strengthening of e-com- merce, combined with brisk import activity at the ports, are steering activity into this submarket. New class A prod- uct is expected to command record rents. Lehigh Valley: Empowered by good location and low cost, this submarket continues to continued on page 10C

owners and developers, where demand for space is steadily growing, availability rates have been dropping, and rent- al rates steadily increasing. Today, according to Jones Lang LaSalle’s quarterly re- search report, approximately 15M s/f of tenant demand is chasing a limited supply of available warehouse space. As a result of this growth in demand, the region is poised to deliver approximately 23 million s/f of new product within the next three years, much of it on a speculative basis with over eight million s/f anticipated to be completed

This increased inventory will continue to satisfy the strong demand and positively impact rents. Warehouse/dis- tribution rents have increased dramatically in comparison to other markets. Over the past 5 years, the Lehigh Valley has seen an uptick in rents of over 35%, from $4/ s/f to close to $5.75/ s/f. To put in perspective, the 25 years prior saw a similar increase of ap- proximately $2.75/ s/f to $4/ s/f. This demand has led to major development of new distribu- tion centers, prompting the

it delivered the next day. This has be- come the top priority for e-commerce c omp a n i e s as they ap- proach their s e a r c h f o r

mega-popu- lation cen- ters as New York, Boston, Philadelphia and Wash- ington, DC. Geographi- cally-driven d e m a n d

Anthony Amadeo Matthew Crocker

warehouse and distribution centers in the Northern NJ - Lehigh Valley region, thus putting a major emphasis on location and the ability to reach their consumers within

seems certain to continue, as companies compete to perfect their “last-mile” delivery plat- forms. That provides great oppor- tunity for the area’s industrial


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