Here is an open letter to the public from R.M Larrabee, director of port commerce department 

To members of the Port of New York and New Jersey community,Happy New Year from The Port Authority of New York and New Jersey. We hope you are looking forward to 2011 as much as we are.Looking back, business in 2010 turned out to be unexpectedly robust. Here at the Port Authority, we remain cautiously optimistic for 2011. However, as competition for business all along the supply chain has increased, cost savings and efficiency improvements are at the forefront of everyone’s mind. Fortunately, over the past decade we have invested more than $2 billion in the port to help us meet these challenges by reducing the cost of doing business at the Port of NY & NJ. You have asked us what we are doing to keep the engines of Port Commerce tuned-up, oiled, and fully fueled. One of the answers is intermodal rail — a network of cutting-edge rail facilities that provide cost savings and reduced congestion to all the port’s customers. Our recent investments in the ExpressRail System not only add value by reducing costs and congestion but also by reducing the environmental footprint of the port.Our recent investment in the ExpressRail Corbin Street rail yard created an unprecedented 78,000 linear feet of track. This will allow us to put more trains into service simultaneously, reducing shipping costs as well as the region’s carbon footprint. And the sheer size of our Corbin Street operation leaves room to satisfy capacity demands well into the future. Consider, too, our new roadway projects. We are committed to invest over $90 million to modernize and improve the network of roads that service Port Newark and the Elizabeth-Port Authority Marine Terminal. The North Cargo Area and Port Street Improvement Program will both widen and realign Port Street and Brewster Road, including each thoroughfare’s connecting ramps and intersections, to a point where safety, ease of use, and efficiency levels stay productive well into the future. We are improving the McLester Street curve at the south end of the Elizabeth-Port Authority Marine Terminal, and will start on a project to widen further sections of McLester Street this year. In addition, working with the New York City Economic Development Corporation, improvements will be made to the network of roads servicing New York Container Terminal to improve the flow of traffic on Forest Avenue. The agency’s recent purchase of the former Military Ocean Terminal at Bayonne (MOTBY) places 130 acres of vital, dwindling waterfront space under public stewardship. Combine this with our acquisition of the 98-acre Global Terminal on the Port Jersey peninsula, which will be expanded by an additional 70 acres from the former North East Auto Terminal, and you see the agency’s clear commitment to the commerce, jobs, people, and future of our port. And of course, our recent pledge of $1 billion to raise the iconic Bayonne Bridge will allow for unhindered passage of larger container vessels to our container terminal facilities west of the Bridge. The alternative that was selected to raise the roadway in the present bridge structure as compared with others reviewed to replace the bridge, is the most cost effective, and has the fewest environmental and neighborhood impacts — a victory for the port and its neighboring communities.Finally, our new Marine Terminal Tariff creates a much-needed fund for critical future capital improvements. Money generated by the modest Cargo Facility Charge will be used to continue to improve and modernize port infrastructure, creating an investment in our port’s future, and therefore an investment in each of us. Despite unforeseen challenges, our commitment to increase capacity and provide for modern and efficient port infrastructure has never wavered: plan wisely, spend thoughtfully, and excel today while planning for an even brighter tomorrow. Thank you for collaborating with us in this plan. Success in our port has always been a result of joint efforts by all members of the port community. As you excel, so does the port. As the port excels, so do we all. As always, we look forward to working with you throughout the coming year.Sincerely,

R. M. Larrabee
Director, Port Commerce Department

Joseph O’Reilly of the publication Inbound Logistics wrote an excellent article about the Ports in New Jersey and the effect of the Bayonne Bridge on the size of the ships that can make it into port. 

http://www.inboundlogistics.com/articles/features/0110_feature01c.shtml

The headline of this article was actually a quote from a broker at an open house today in reference to the high vacancy rate on Westside Avenue in North Bergen, NJ. A quick CoStar survey shows that there is 1,989,248 s.f. of industrial space available in North Bergen out of a total of 5,053,729 s.f. (a 39.36% vacancy rate) 680,042 s.f. are on Westside Avenue. Another 641,584 s.f. are on 71st, 91st or 83rd Street.

The open house today was at 2501 71st Street in North Bergen, NJ. This is a 165.090 s.f. building with 14,779 s.f. of office on two floors. The building has 3,600 s.f. of cooler space and 5,800 s.f. of freezer space, 22′ ceilings, 10 interior tailboard doors, 6 exterior tailboard doors, 2,000 amp service.

The building is for sale at $93.89 per s.f. and for lease at $3.99 per s.f. This is aggressive lease pricing compared to other buildings in the neighborhood.  With an Exit 8A-like vacancy rate, the $3.99 per s.f. leasing rate is interesting but just like many of the other areas with excessive vacancy, a lower price does not seem to stimulate demand. Consumer activity will get the warehouses humming again. However, the American consumer has been very conservative. That translates into less need for warehouse space. And the by-product of that can be seen on Westside Avenue in North Bergen.

In a recent webinar, Dr. Peter Linneman, the Albert Sussman professor of real estate, finance and public policy at the Wharton School of Business, University of Pennsylvania, stated that the economy had bottomed out. I thought for a moment that if there was an uptick in the demand for large warehouses, where could at least 500,000 s.f. be found. Here are a few examples.

Starting at Exit 7A of the New Jersey Turnpike in Robbinsville there are three buildings all witin a stones throw of each other. There is  800,311 s.f. and 905,000 s.f. on West Manor Way. Nearby on Applegate Drive there is 1,000,749 s.f. All three of these builidngs have 36′ ceilings. All prices are listed as negotiable.

At Exit 8A of the New Jersey Turnpike there is 611,320 s.f. on Costco Way in Monroe with an asking price of $4.25 per s.f. and 36′ ceilings. There is 530,109 s.f. on Thatcher in South Brunswick with an asking price of $2.75 per s.f. and 30′ ceilings.

Near exit 9 of the New Jersey Turnpike is the former Church & Dwight Facility on Jersey Ave. in North Brunswick with 524,518 s.f. available at $3.00 per s.f. The ceiling heights range from 25′ to 28′.

At exit 10 of the New Jersey Turnpike there is 599,136 s.f. at the aptly named T10 Commerce Center in Edison. Ceiling heights range from 20′ to 45′ (see previous post on this building.) The rent is listed as negotiable.

At exit 12 of the New Jersey Turnpike there is 1,064,515s .f.  at (once again aptly named) I-Port 12 in Carteret. The ceiling height is 36′ and the asking rent is $5.75 per s.f.

Just off exit 14 of the New Jersey Turnpike there are not available existing modern warehouse facilities in the 500,000 s.f. range. However, you can get 705,000 s.f. build to suit at Nexus Port East on Delancy Street in Newark. And, if you travelled 40 miles west on Route 78 when you exited the New Jersey Turnpike #14 you could get 729,000 s.f. However, if you were asked the age old Jersey question “what exit” you really couldn’t say “14.”

Just a little bit off exit 15E of the New Jersey Turnpike, you can get an 878,000 s.f. build to suit on Route 1 & 9 in Jersey City.

Any further north on the New Jersey Turnpike and there is nothing available in the 500,000 s.f. range.

Now, having gone through this exercise, I just hope that demand picks up to where there are actually companies looking for such a building.

Looking Forward to Twenty Ten After what can only be described as a miserable year for leasing activity in 2009, at least froma Landlord’s perspective, there seems to be some life heading into 2010…

Click on this link for the full report.

http://www.naihanson.com/flyers/Exit8A2010.pdf

The former New York Times building that was puchased in 2007 by KTR Capital Partner has been renovated. KTR has completed extensive renovations on the property. The property is located at exit 10 if the New Jersey Turnpike in close proximity to Raritan Center, which many believe to be the best industrial park in the state.

At a recent open house the brokerage community was able to view the “new” facility. The toal buildng size is 831,422 s.f. Ashley Furniture is the first tenant in the buildng taking 232,291 s.f. That leaves 599,131 s.f. available for lease in many different configurations. The smallest size available is 155,151 s.f. The building can also be divided into 238,219 s.f., 205,761 s.f. and 443,880 s.f.

There is new T5 energy efficient lighting and an ESFR fire suppression sytem in the warehouse. The loading dock doors and levelers are new. There are 87 exterior tailboard doors, 10 interior tailboard doors and 4 drive-in doors.

The ceiling height ranges from 30′ to 45′ with the high ceiling area starting on the northern side of the building and taking up a chunk of the center of the building. So, all of the potential configurations have a portion of 43′ to 45′ ceilings. Along with high ceilings comes heavy floor loads. The floor can accomodate 800 to 1,100 pounds per s.f.!

KTR has been sensitive to the needs of the marketplace by including 195 trailer parking spaces with room for expansion. Some buildngs that are closer to the port have neglected the need for trailer parking and have suffered the consquences of prolonged vacancy or very low rents.

KTR made quite a transformation of the New York Times building from a gritty printing operation to a state-of-the-art distribution building.

In the past few weeks I have been in meetings with major developers to discuss their available properties. Some developers have a relatively good occupancy rate. However, within every portfolio there are the buildings that just sit there regardless of how low the price is reduced. One building in particular was advertised to a room of brokers to have a starting rent starting with a 1! Granted that building is over 40 miles from the port. However, a starting rent with a 1 is unheard of. That is until now. With job losses continuing and fewer goods coming through the port, there is less demand for large warehouses. That is an understatement when you look at the many emtpy buildings at Exit 8A.

The increasing vacancy is taking its toll on the land that developers have in the pipeline to build new state-of-the-art facilities. The best hope to make a deal is the build-to-suit. The old Coca Cola site in Newark is being offered by Summit Associates as a build-to-suit with one building of 705,000 and another at 105,775 s.f. The Morris Companies have a site in Newark that can accomodate a 362,000 s.f. facility. It is currently listed as a build-to-suit but Morris plans to build on spec next spring.

There development opportunities a little further north of the port in North Bergen. There is a three building portfolio of 207,000 s.f. for sale as is but it is also being marketed as a redevelopment opportunity. However, North Bergen’s vacancy rate has also been increasing. Therefore, this redevelopment opportunity would probably be a build-to-suit.

It is surely a tenant’s market. Landlord’s are being very flexible to tenant’s needs. So, now may be the time to look into various leasing options to best suit a tenant’s changing business.

A search of the available warehouse buildings over 50,000 s.f.  in the Edison, NJ area does not reveal the massive supply that exists at Exit 8A. (Cranbury, Monroe, South Brunswick, Dayton) However, there is one street that seems to have more than its fair share of vacancy: Carter Drive. It is a short street with a total of 1,670,412 s.f. of warehouse space. Of that, 413,257 is available or 24.73%. There are four spaces available that range from 56,000 to 183,172 s.f. with a range of asking rents from $4.30 to $5.50 per s.f. The ceiling heights are mostly 24′. The smallest space, 56,000 s.f. is a little peculiar because it is completely air conditioned. Currently, it is being used as a warehouse for the storage of fine wines.

Exit 10 off the NJ Turnpike is not the land of million square-footer’s. The largest availability is 831,000. This space, now known as Turnpike 10 Commerce Center and formerly known as the New York Times building, is currently 1,200,000 s.f. which was designed for the New York Times. For a distribution facility, there is far too much office (215,000 s.f.). The ceiling heights range from 31′ to 50′.  The owner, KTR Capital, has redesigned the space for a single tenant of 831,000 s.f. and has alternate designs for use as a multi-tenant building. The quoted asking rent is $6.50. Although to be competitive with I-Port 12 (two brand new buildings totaling 1,264,633 s.f. at exit 12 of the NJ Turnpike) Turnpike 10 may have to come down price-wise.

The sweet spot for Edison seems to be in the 100,000 to 300,000 s.f. building with 24′ to 28′ ceilings. Two perfect examples are 1.) 47 Brunswick Ave, a 265,000 s.f. building with 28′ ceilings on the market for $5.25 per s.f. and 2.) 60 Brunswick Ave, a 152,000 s.f. building with 24′ ceilings on the market for $4.50 per s.f.

Exit 10 off the New Jersey Turnpike is an excellent location for companies to serve customers to the north and south via the New Jersey Turnpike and east and west via route287.

Scott Perkins

In buildings with over 50,000 s.f. available, there is over 10,000,000 s.f. available at exit 8A! 2,000,000 s.f. is available  in Monroe and about the same in Cranbury. By far, South Brunswick has the most available at 5.3 million square feet.

Now for the asking rents. Many buildings in the 8A market were asking in the $5 to $5.5 per s.f. range about a year ago. Now, there is only one building over $5 per s.f. Most of the buildings have changed their asking rent to “negotiable” because realistically they are just looking for someone, anyone, to make an offer. The problem isn’t the lease price. The problem is demand. There isn’t very much of it. If a company doesn’t need 500,000 s.f., it doesn’t matter if the price is reduced to $1.99 per s.f. They still don’t need it.

With so many buildings available, it is just a matter of time before more and more buildings in the exit 8A market will be for sale. Some are quietly on the market and some are openly on the market. Either way, I think more will be available for sale. The buyers and sellers still have to come closer for more sales to happen. They sellers have to realize that prices must come down. Bueyers have to realize that prices are not going to come down to Great Depression levels of the 1930’s and maybe, maybe deals can start to be made.

Scott Perkins

The September 30, 2005 marketing material for the Portsfield Initiative that the Port Authority of New York and New Jersey and the New Jersey Economic Development Authority read as follows

 “The Port Authority of New York and New Jersey (PANYNJ) and the New Jersey Economic Development Authority (EDA) seek partnerships with the private development community and others to put underutilized and brownfield sites back into productive use to support Port commerce operations.”

 I thought I would look back at the 17 sites that were highlighted in that document and give an update on the status of each site. Part I will look as some of the sites that were on that list.

Site #1: Saw Mill Park Barczewski Street LLC - This 16 acre site at 670 Bellvelle Turnpike in Kearny is owned by Russo Development. They also own 660 and 680 Bellvile Turnpike giving the Saw Mill Park a total of 25 Acres  with 398,612 of leasable space. The project has been built. Pepsi leased 135,115 and  H.D. Simth Wholesale Drug has 211,418 s.f. The balance of 52,079 is currently available. 

Site #5: Coca Cola 429 Delancy Street, Newark: Coca Cola sold the property to Summit Asscoaites. The project is now called Nexus Port East. Summit will do a build to suit. They can build two buildings, a 775,000 s.f. and a 105,775 s.f. building. The property is also listed for sale.

Site #8 - Greenfield Builders/North Avenue, Elizabeth: The site is now owned by IDI, a developer from Radnor PA. They built a 342,705 s.f. building on 16.6 acres. The asking rent is somewhere in the low to mid $9 per s.f. range. This builidng is very close to  Port Newark and Port Elizabeth and Newark Liberty International Airport.

Site #14 I-Port 12, Carteret: This Panattoni development is located right off exit 12 of the New Jersey Turnpike. You can see the building from the Turnpike. They built two buildings, a 1,064,515 s.f. and a 200,218 s.f.  At one time the asking rate was $6.85 per s.f. but it is now listed as negotiable.

Of these four sites, the most successful is the Russo development in Kearny. It was built and mostly leased. Two of the these sites have been built but have no tenants. The Coca Cola site is just on the drawing boards. With these difficult economic times, some of these properties may remain vacant for some time.

Scott Perkins