Is Industrial Already in the Eighth Inning?

JERSEY CITY, NJ – CapRE’s 2018 Northeast Commercial Real Estate summit featured a rousing discussion on the state of the Garden State, New Jersey Development, Investment, Financing & Leasing: The Amazon State and Analysis of Traditional Deals. Moderated by Stan Danzig, Vice Chair at Cushman & Wakefield, the panel kicked off with the question on everyone’s mind — Where is New Jersey in the cycle? Below is a transcription of part of the discussion that followed when Danzig asked the half a dozen discussants that question.

Danzig: According to our stats….we’re close to 75% of all new product in New Jersey being leased either before it’s started or before it’s complete. And that’s pretty active competition. So, Steven Beyda, where are we in the cycle?

Steven I. Beyda, First Vice President, CBRE, Inc.: I like Omar’s analogy of a baseball game. Because for a long time we were thinking we were later in the game. Maybe the seventh or eighth inning. But it seems like the innings could drag on. We’re doing very well at the moment and I don’t see any signs of it slowing down. The time being, while retail itself as an overall picture has slowed down — I think this is the third consecutive month that the retail has declined – but it’s at a very minuscule amount. As a whole the e-commerce side continues to grow.

So I think that as long as we have the ability to continue to bring on more industrial space and supply the offset of the retail brick and mortar that seems to be slowing down considerably, we will continue to see growth in the industry overall. Specific to New Jersey, we’ve been a little more careful this cycle in terms of the amount of development that were putting out on an annual basis. I think developers like CGIS are getting more in tune to their competitive product. As we’re looking at maybe a demand of probably 12 to 15 million square feet of needed space this year, we’re probably looking at a projection of 10-12 million square feet of new buildings coming online this year. And I think that as long as we stay ahead, or in this case, behind the demand, with your supply, I think that the demand will continue to stay healthy.

Danzig: There is also so much less land now then there was before the melt-down years. Howie, what do you think about the cycle?

Howard Applebaum, President, Corporate America Realty & Advisors: Well, my colleagues have really hit the numbers with statistics. I think that, basically, for some companies, they may not be aware of it, but they’re probably in the eighth inning.

Why? Because you have the Amazons, the Wayfares, and as long as they have the disruptive model that can come into an industry and overnight disrupt the people who don’t know where they stand, continue to pay increases in rent, paying higher labor costs, especially with this governor who is trying to raise wages to $15 an hour and will hurt smaller companies, and those companies who can raise money either through corporate financing or corporate equity, they are going to be survivors. The guys who can’t keep up are the P&Ls, the private equity guys could pull the plugs, and these guys in the eighth inning just don’t realize it.

Banner Photo (L-R): Steven I. Beyda, First Vice President, CBRE, Inc & Howard Applebaum, President, Corporate America Realty & Advisors.  For more from this discussion, check out an earlier CapRE Insider Report: “What Inning is the Industrial Sector in?”

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