Q&A with River Terminal’s Alan Lambiase: Development in New Jersey Riding Exponential Growth Curve
by Josh Anderson
Alan Lambiase is the Director of Sales & Marketing for River Terminal Development in Kearny, New Jersey. A 27 year veteran of the New Jersey Industrial Real Estate industry, Alan has been with River Terminal since 1991. During that time, RTD has developed over 10 million square feet of multi tenanted industrial properties in New Jersey and Pennsylvania. RTD currently owns and manages a portfolio consisting of 3 million sf of industrial buildings on 175 acres in Kearny, NJ with approvals to build another 400,000 sf. Alan will be a featured speaker at CAPRE’s Sixth Annual Northeast Industrial Real Estate & E-Commerce Distribution Summit on March 14, 2018. In anticipation of the event, we connected with Alan to showcase his latest activity, perspective, and predictions for 2018.
CapRE: Thank you for chatting with us today, Alan. What have you been up to lately at River Terminal?
Lambiase: Right now, we have a 189,540 square foot building located at 50 Cable Drive in Kearny that we are actively marketing. We can divide the building into units as low as 32,500. We have a lot of activity on that property right now and are looking forward to filling the building in 2018 with 1-5 tenants, then moving onto to construction of an 80,000 sq feet bldg. at 140 Central. They both will feature all of the modern specs like a 36-foot clear, offices to suit whatever the tenant requires, trailer parking, a sprinkler system, all the amenities that logistics and e-commerce companies are looking for to get their product to market.
CapRE: And what else are you looking forward to in 2018?
Lambiase: Well, I’ve been doing this since 1986. I started as broker actually and have been with River Terminal since 1991. In that time, history has, as with most markets, been cyclical. There’s always been an adjustment every ten year or so. I’d like to say that, based on past history, we’re due for one. But I don’t see anything telling me that there’s going to be a glitch in the market or a correction at this point. There still seems to be a lot of activity from brick and mortar operators. Retailers are all looking to establish a presence on the internet and get into e-commerce if they haven’t already.
People want what they want when they want it. That’s spurred a lot of activity over the last years. Land values for acreages being sold is increasing as much as 20-30 percent from where they were. That would indicate there is a scarcity of land where I’m operating, at least in the Tri-State area. This has led to higher development costs and should lead to higher rental rates moving forward. We have continuously seen increases over the last several years, and I don’t see an end to that right now.
CapRE: What, if anything, could slow things down?
Lambiase: I think that the only think that might interrupt things moving forward is something outside of our market itself – whether that be the financial markets or something that affects the world politically. But it’s hard to say. What I am seeing out there leads me to believe that we will keep moving forward into the foreseeable future. No one I’ve seen out there is highly over-leveraged. Things are stable.
CapRE: Are there any niche markets out there that might experience troubles?
Lambiase: You know, prepared meals – companies like Blue Apron, Hello Fresh, Boxed, Plated – I’m sure I’m missing half a dozen other — those companies have taken several hundred thousand square feet of space in New Jersey. The debt sector itself doesn’t seem to be very stable in that marketplace – Blue Apron just had an IPO and they lost 30% of their value. But that’s just one small sector of the overall economy. If something goes wrong with that industry or if it adjusts or there’s a consolidation, then some property might come back into the market. But based on the fundamentals we’ve discussed, I think someone else would be there and ready to pick them up.
CapRE: What are you most fascinated with right now out in the industry?
Lambiase: The thing that’s been fascinating to me in past few years has been the size of the requirements for e-commerce. If you’re coming out of the ground with a 3 or 5 million square foot build, you have just as much of a chance as a 100,000 square foot build. Or perhaps better. The size of development in this state is just going on an unbelievably exponential curve. Going from building 100-200 thousand square feet, to where can I build a million square feet?
And by the way, if you’re looking for a million square feet in Central to Northern New Jersey, there are very few options at this particular point. Certainly nothing that is green-field. I don’t know that anything is shovel-ready for tomorrow. If someone knocked on my door and said, I need 1 million square feet, can you build it? In Central or Northern New Jersey, I don’t know where to go.
CapRE: Wow. So we’re looking forward to seeing you at CAPRE’s Sixth Annual Northeast Industrial Real Estate & E-Commerce Distribution Summit. What do you anticipate will be some topics to tune your ears to?
Lambiase: I’d like to continue the conversation that was actually started at another CapRE event 3 year ago. When we first had some of the larger deals put together by ProLogis, some higher numbers that hadn’t been seen before – there was a question in my mind at that point in time as to whether the Economic Opportunity Act — which had been ratified by Christie — was a positive or negative. At this point, in hindsight, I think you can only say it’s been positive. It’s spurred on a lot of activity, lowered unemployment rates – which dropped from 9 to 4 percent.
I’m also looking forward to getting other people’s opinion on exactly what is going to be the biggest obstacle or hurdle to rent growth moving forward. You know, in our industry we write a “net lease” and the tenants will look at base rent + more on top of that such as property taxes, that are always passed through to the tenant. We know that with the new tax bill, blue states are going to take a hit. How that relates to municipalities and how they are going to stabilize their tax base moving forward will be interesting. Are they going to try to protect the residents of their community somehow? Is that even legal? I’d like to hear from the industry professionals at the event about what their concerns are and what their ideas will be as to what the future will be over the next couple of years.
CapRE: Finally, what’s the special sauce to sealing deals and staying ahead in the CRE game right now?
Lambiase: Flexibility within your projects is the bottom line. It has come to my attention, that with the onslaught of logistics and ecommerce and next-day delivery, that people are still figuring it out. Not only on the deliver side but on the return side. That is of course going to affect the retailers’ bottom lines. Be able to be flexible, whether that’s additional loading or parking.
In the CRE industry, we went to a model of, let’s find the site and maximize the envelope — there wasn’t concern for parking. Then as we moved forward, we realized that if we have all these trucks coming in to deliver, we’d need somewhere to park. So people started looking at that challenge. And now you have companies that, based on last-mile delivery, are doing that in different ways – some with vans, some smaller trucks, so where do those park? What is your access to toll road ways, local road ways, etc. and how does that all fit in with your customers’ needs? Are you going to be willing and ready to maintain higher occupancy level at your facilities?
CapRE: Great questions. Thank you for your time today. We’ll see you in March, if not sooner!