Located along the New Jersey Turnpike (I-95) in the geographic center of the Boston-Washington, D.C., corridor, the Exit 8A industrial market is situated 45 miles southwest of Manhattan and 60 miles northeast of Philadelphia. This location enables distributors to reach more than 130 million consumers, one-third of the northern American population, within a one-day drive. With currently 67.48 million square feet, it is the largest submarket in Northern New Jersey. The vacancy is currently dramatically down from the double digits of the recession to 8.4 percent. Asking rents are inching up to the mid-$4 range, NNN, due to the tightening of the market and a shortage of attractive development sites at 8A.
National and international tenants are drawn to the submarket’s superior highway access and proximity to the New York/New Jersey ports and Newark Liberty International Airport. The Exit 8A submarket is home to national and international distributors, manufacturers, and logistics firms. Companies with a major presence at Exit 8A include The Home Depot, Pearson Education, ConAgra, Crate & Barrel, FedEx, Costco, William Sonoma, Staples, Iron Mountain, Kellogg’s, Petco, Volkswagen, Ford, LG Electronics, Wakefern, L’Oreal, and Raymour & Flanigan among many others.
The 8A industrial market’s desirability is best illustrated by its list of institutional owners, including CB Richard Ellis Investors, BlackRock, Morgan Stanley, ING Clarion, TA Associates, Allianz, RREEF, Prologis, JP Morgan, Terreno Capital, Cabot Properties, USAA, and TIAA-CREF. Underlying fundamentals for investment have never been more favorable, with a shortage of industrial space and limited amounts of well-located developable land. More recent-construction, higher-quality buildings currently collecting lower rents are positioned for historical upside potential. Investment sales for 2013 are currently at record levels. In fact, the first quarter of 2013 alone saw higher sales volume than all of 2012.
Leasing activity is at pre-recession highs as well. Exit 8A also greatly benefited in 2013 from Northern New Jersey tenants seeking higher ground from a number of Hurricane Sandy-damaged buildings, helping further tighten the industrial vacancy rate.
Rising volume at Port Newark and Port Elizabeth is another strong driver for 8A leasing and sales. Exit 8A is located only 30 miles to Port Newark and Port Elizabeth. As the largest containerized deep water shipping terminal on the East Coast, the port totals 2,100 acres. Global trends such as a manufacturing shift towards northern and western Africa as well as Asia will shift deliveries to eastern ports via the Suez Canal. Going forward, market fundamentals will be supported by several key infrastructure projects including:
• Expansion of the Panama Canal, doubling canal capacity and allowing for larger ships and more cargo to reach America’s eastern seaboard
• $2 billion dredging project to deepen the port channel and berths to 50 feet
• $1 billion to raise the Bayonne Bridge
• Port terminal improvements, including extended piers and new container cranes
• $2.5 billion widening project expanding the NJ Turnpike to 12 lanes
These improvements will allow Port Newark/Elizabeth to accommodate the next generation of cargo vessels that transport more than 8,000 truck-sized containers. The ports’ ability to handle containers is expected to double over the next 10 years and increase fivefold over the next 30 years.
Due to its proximity to New York City and the wealthiest population centers in the United States, Exit 8A is expected to benefit tremendously from the explosive growth of e-commerce and the push for same-day delivery. For example, Amazon — clearly the leader in online sales — recently signed agreements for a 1 million-square-foot built-to-suit, which is under construction at Exit 7A, and a 562,230-square-foot renovate-to-suit at Exit 12 in Avenel. With an expected increase in internet sales of 62 percent from 2011 to 2016 totaling $327 billion, increased industrial demand will continue for Exit 8A for the foreseeable future.
— By Thomas Monte III, Vice President, Industrial,Sitar Realty Company/TCN Worldwide. This article first appeared in the November/December 2013 issue of Northeast Real Estate Business magazine.