Wharton Equity’s Peter Lewis to CAPRE Audience: “We’re at Dawn of a New Industry”
JERSEY CITY, NJ – New Jersey may the Garden State, but lately, you could be forgiven for calling it the e-commerce state. No Garden State CRE summit is complete without a conversation about the latest in shipping and receiving goods from orders placed online. That’s why CAPRE’s Northern New Jersey and Gold Coast CRE Summit featured a presentation by Peter Lewis, Chairman and President of Wharton Equity Partners, a firm which sold a wealth of properties in multi-family in favor of redeploying capital into industrial properties.
“We’re at the dawn of a new industry,” he asserted, before giving a taste of what his firm has been up to recently. “We’re acquiring a building in Philadelphia, right next to Center City, about 300,000 square foot warehouse. When we went to see the CBRE broker and were just getting an overview of the market, he had a set up for the property crumpled up in the corner. We took a look at it, and he said, you don’t want this. It’s a crappy warehouse. There are pigeons in the rafters, there’s a ramp in the middle of it.”
“Industrial Real Estate Capital Raising, Development & Leasing in 2019: Is New Jersey Positioned to Lead the Nation in Industrial Activity in the next Three-to-Five Years?” relied heavily on the 32 years of experience offered by Lewis, whose firm aims to look ahead based on trend lines to figure out the best place to be putting their money. According to Lewis, this foray into industrial real estate has been the most exciting opportunity of his career — because it is the only business within real estate that is undergoing such a profound transformation, thanks to technology.
In terms of the Philadelphia warehouse opportunity, Lewis asked where it was located. The broker said “it’s next to 6 million people,” he continued. “So we immediately looked at it, said we’re going to buy this property, and we’re going to close on it in two weeks. So we’re going to just re-do it – pull the roof off, re-do the floors, re-do the parking lots, re-do everything. And already, we’re getting inquiries from Peapod, and from all of these other firms that want to get their stuff into the city within an hour.”
According to Lewis, what is so fascinating about this experience is how we live in a world that is divided. “Some people look at this real estate as though it’s your grandmother’s real estate from 50 years ago, but others are looking at it with regard to how it’s going to be used in the years ahead, thanks to what is occurring in the world right now,” he explained. After all, the pace of e-commerce sales is increasing exponentially. FedEx recently projected that the number of packages that are delivered in one day will double – from fifty million to one hundred million.
“15% of all sales (in the US) today are online, and in Europe it’s 23%. China’s growing faster. So we have these tailwinds pushing us forward into the consumption of online goods,” asserted Lewis, who then shared that his firm not only builds large distribution centers in the Northeast, but also in the Southeast.
The things that we look at in Industrial, especially with regards to the Northeast, is when you look at the Meadowlands for example, the pace of rent increases astounding. “Today we’re probably at $14-$16 bucks, depending upon the location, and those rents are jumping at least 5% per year right now.”
“As we look at the Northeast, particularly in this region, we honestly love the market around here. But we’re also very interested in the Lehigh Valley. We’re signing a contract right now to buy a 600,00 square foot warehouse down there. And the reason is because of density. All of this activity around e-commerce is predicated upon getting goods to consumers as quickly as possible.”
“You may have read about how Amazon recently announced that there would be no more 2-day Prime – it’s all 1-day Prime,” chuckled Lewis. “When that happened, people saw it and then went back to their jobs. But in the boardrooms of Wal-Mart and Target, they started crying. Because it meant that if they don’t catch up and do 1-day as well, they’re going to be out of business. There are retailers now that are looking at extinction – not just tepid sales. So there’s an urgency to figure out how to change their supply chain to get goods into the city faster.”
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