FLEXE 5X5: Cushman & Wakefield Q&A
Welcome to FLEXE 5X5 where we talk to experts across industries about the trends affecting their supply chain, logistics and warehousing. In our inaugural 5X5 we talk to Jason Goldman, Executive Director of Cushman & Wakefield for NY / NY.
FLEXE: With warehouse vacancy rates so low, we assume large developers take notice and start building additional facilities. How much new development are you seeing, and is it happening fast enough and with enough volume to make up for the shortfall?
Jason: We are fortunate in the northern and central New Jersey markets to have many of the nation’s more notable developers and local legacy developers that have a keen interest in developing industrial projects on a consistent basis, almost regardless of the global climate. The timeline to acquire land, entitle it and build can take 18-36 months depending on the site specific issues, township and building season, so we have folks constantly looking to add new product to the development pipeline. NJ is a very dense, high barrier to entry market for developers, thus the math must truly make sense before anyone sticks a shovel in the ground, so there is a good set of checks and balances to deliver new product up and down the 95/NJ Turnpike corridor. The past 36 months, the development community has done a good job delivering new supply to the in-fill markets, closer to the Ports and the consumer.
FLEXE: What are the trends with new development? Bigger buildings in more suburban locations, or smaller buildings in more urban locations?
Jason: Developers are being “smarter” with their site plans, i.e. more car and trailer parking than was conventional 10 years ago when developers wanted to max out a site with the biggest building possible. Employee densities are growing, need for seasonal parking is up, more power delivered to projects given automation and sortation equipment, having redundancy in utilities given some significant storms the past few years and threats of these storms will continue, more dock doors the better.
We have seen demand from urban in-fill requirements, smaller buildings for same delivery model where cube does not matter but parking and proximity to labor and the end customer is key and tenants will pay up for that luxury.
On the big box side, we still see a trend for large assets over 500,000ft-1 mill ft for regional dc’s, sort centers in the central nj market and its not uncommon in the Pa markets for deals to be done over 1 mill ft given the radius that they might service.
FLEXE: How have landlords philosophies changed as the market has gotten tighter? In the past, landlord’s might bend over backwards to get a tenant, but now they have the leverage. How has this affected the market for short term leases?
Jason: It’s not rocket science, purely a supply and demand theme: markets get tight from a vacancy standpoint and rents rise, concessions and improvements for the tenant decrease. We continue to see many of the tenants from the 3pl world push for short term leases (3-5 years) given the nature of their business, but that can be difficult in this climate as many tenants and landlords are looking for longer term commitments (5-10 years).
FLEXE: As a broker, how do you stay busy in this type of market? What are the things you can do to help your clients despite having little leverage?
Jason: I think being a balanced broker is a good approach to the business; meaning, your book of business should have landlord clients and occupiers, so you are not solely relying on one side of the ledger to make your income.
A successful broker is constantly on the treadmill for new opportunities, whether it be at the grocery store, the mall with your family or driving on the highway; there are new users of space popping up every day and you need to identify trends early and make canvass calls the old fashioned way regardless of your tenure in the business.
Tenants with solid credit have a good opportunity to negotiate favorable terms and there are many scenarios where a client is one of several vying for a unit of space and the healthier their balance sheet, the better. A broker must stay focused on his/her local market lease comps, trends and users in the market so they are relevant to their clients. Having good information is powerful in our business.
FLEXE: Tell us about your long view of the market. What does supply & demand look like 5 years from now and what will be the key drivers of change?
Jason: NJ is a great place to be an industrial real estate broker today and for the future. There are a number of large, growing communities in the northeast, lots of disposable income, proximity to the 3rd largest US Port and NYC; having a limited supply of land also helps keep rents up and development in check. NJ has been doing some positive stuff from an incentive standpoint to keep and grow jobs in the Garden State. Who knows what inning we might be in of this boom, 7 or 8 probably, but hope we will be playing for extras for the next 12 months. But everything is cyclical, at some point this will slow down and then we’ll start ramping up for the next run.
Make sure to check back to read Part 2 of our 5X5 series with Jason!