Northeast Real Estate Business

NOV-DEC 2015

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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Page 52 of 64

52 • November/December 2015 • Northeast Real Estate Business imity to the New York metropolitan population and the Port of New York and New Jersey. The most notable en- try is Amazon, which recently took 1.1 million square feet at 8003 Industrial Ave. in Carteret, New Jersey, for its new state-of-the-art fulfllment center. "Amazon has helped the market a lot," Danzig says. "You are now seeing buildings being absorbed by similar companies who are coming here be- cause of the population density and the new concept of same-day delivery speed to market." In another signifcant transaction, Prologis recently added to its already extensive portfolio in the region by completing the purchase of 3.2 mil- lion square feet of Class A industrial operating and development properties from Morris Realty Associates. Other recent deals include Romark Logistics' 359,950-square-foot lease at 23 Mack Dr. in Edison, and FedEx's build-to- suit commitment for 315,000 square feet at 1075 Secaucus Rd. in Secaucus. In addition to build-to-suit activ- ity, institutional developers have tak- en note of the strong fundamentals and are coming in to develop large- scale projects on speculative basis. For example, Duke Realty delivered a 459,000-square-foot warehouse in Linden last fall, and a joint venture between The Rockefeller Group and Alferi, LLC is under construction on a 930,030-square-foot speculative facil- ity at Exit 8A on the New Jersey Turn- pike. (See sidebar below.) "A speculative building of this size is very rare for New Jersey," Levy says. Though unusual, Egan notes that spec projects of this scale may become more of the norm in Northern and Central New Jersey due to such strong tenant demand. "In the last year and a half, I'd say spec development has started to be on par with build-to-suit, and now it's the majority of new development," he says. "What's notable is that in a lot of key markets, we're seeing these de- velopments get pre-leased before the building is complete." For spec deals in Northern and Cen- tral New Jersey, the average time on the market is only 4.5 months, Egan says. "That may not be pre-leased, but that's really fast," he says. "The demand is such that quality, Class A, modern space doesn't stay around for long." With so much development de- mand, Danzig notes a land grab is tak- ing place. "Almost every land site has developers scouring," he says. "The ROCKEFELLER AND ALFIERI NEAR COMPLETION ON LARGE-SCALE SPEC PROJECT Having developed approximately 3.5 million square feet of industrial space in the Cranbury, New Jersey, submarket over the years, New York City-based The Rockefeller Group is no stranger to the area or its de- mands. Edison, New Jersey-based Alferi, LLC, also has plenty of expe- rience there: The private commercial real estate corporation has developed 1 million square feet of industrial space and has another 5 million in the pipeline. The two long-time developers are building Cranbury Station Park, a 930,030-square-foot speculative building located off Exit 8A on the New Jersey Turnpike that they be- lieve will meet the demands of the next generation of e-commerce ten- ants. "Both of our companies build class- of-the-market buildings," says Clark Machemer, senior vice president of The Rockefeller Group. "That's what we're attempting to accomplish with this building." Driven by New Jersey's constrained market, the venture made the deci- sion to build the project on a spec ba- sis. "The vacancy rate for Class A indus- trial has dropped below 5 percent," says Michael Alferi, president of Alf- ieri LLC. "Our project is approaching 1 million square feet, which is a sig- nifcant endeavor. There is some risk doing this on spec, but we think there is a market to be had that doesn't exist in build-to-suit. We think it's under- served. By building spec, it absolutely creates a real user interest that some- how can get deferred in build-to-suit scenarios." Also generating real user interest is the building's design, which has the "tenant of the future" in mind. "Real estate is being impacted by culture more than ever before, espe- cially in the industrial market," Ma- chemer says. "Due to the growing demand of how people want their goods and services, e-commerce companies are having to adjust. The building we designed is meant to ac- commodate those changing cultural behaviors and the resulting impact on the supply chain." What that translates to, for one, is 40-foot clear heights. "I believe we may be only the second building in the entire country to go spec with that clear height," Machemer says. "With those clear heights, we're able to ac- commodate the mezzanines more easily, which is required for the e- commerce pick-and-pack process." "In today's industrial world, it's not square feet that matter as much — it's cubic square feet," he adds. "And in the e-commerce world, you have people, not robotics, up in the mez- zanines doing individual picking and packing, so you have to create multi- levels in the building space to accom- modate these goods and services." Alferi agrees. "The height of the building was a big strategic decision for us," he says. "We could've gone in at 36 feet and checked a box, but we think the market has been trending to 40 and we've seen user interest at that height." A second amenity that stands out is trailer storage: Cranbury Station Park will have one trailer storage per loading dock. "Trailer storage used to be a plus for a building," Alferi says. "Now it's a requirement. We even compromised square footage of the building to accommodate the one- to-one ratio, because we think that's just as important as the height of the building." "You don't just build it 40 clear and that's it," Machemer says. "You have to be able to provide the additional amenities that e-commerce compa- nies require." Another unique amenity that the site boasts for e-commerce companies is extra land. There is room to build another 300,000-square-foot building, or the pad can be used for trailer stor- age or additional employee parking that is often required by internet ful- fllment operations. "We strategically made a deci- sion not to build the neighboring 300,000-square-foot building because a full-building user might need it for additional land for trailer storage or car parking, or some sort of ancillary use," Alferi says. With construction on pace to have the state-of-the-art building enclosed by the end of the year, Cranbury Sta- tion Park will be ready for occupancy by the frst quarter of 2016. Though no tenant is signed yet, Alferi and Machemer have gotten enough interest to feel confdent in the future success of their venture. "I'd put our building on par not only with any spec building in New Jersey, but any spec building in the country," Machemer says. — Lindsey Walker Marcec The Rockefeller Group and Alferi LLC are developing Cranbury Station Park, a 930,030-square-foot speculative building located off Exit 8A on the New Jersey Turnpike. Duke Realty developed a speculative 459,000-square-foot warehouse in Linden, New Jersey.

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