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Industrial Real Estate: A Hot Commodity

The trajectory of the industrial real estate market in New Jersey and in most port centric markets throughout the country, has continued to push to elevated heights. The path of least resistance is “up” both in terms of price and demand. Asking rents are higher, prices per square foot to acquire an industrial property are higher, and the overall supply of inventory has become so minute that those intent on purchasing are considering properties they would not under normal circumstances. Drawing upon my own observations in the marketplace in which buildings that may be deemed “dated” by current industrial standards (shorter truck courts, 16’ clear heights, 40” docks heights, and 1960’s construction) are fetching prices that are in some cases ±25% higher than comparable properties which sold two years ago. Properties of the same caliber are demanding rents of a similar increase, which presents an opportunity.

 

Owners of industrial property in New Jersey have been placed upon the highest pedestal in the land. They possess what many do not, and they control a product which is desperately sought after. Market direction is dictated by the ratio of buyers to sellers and in this market the former heavily outweighs the latter. An opportunist would consider the above as obvious reasons to “cash in” or redirect their sale proceeds into a higher yielding real estate investment. These proceeds made available from your disposition allow for investment into a multitude of real estate asset classes–many of which are undervalued and generating higher rates of income than perceived.

 

Realistically speaking however, herd mentality tends to prevail and many owners who are equipped to make the move to greener pastures will hesitate until the opportunity diminishes or no longer exists be it from the standpoint of time constraint or an emotional attachment. While both circumstances are warranted, the property in which you operate was acquired as a matter of creating, building, and growing your business, and those same factors should be considered as reasons to further expand your business empire. For those on the other side of the coin, a simple review of your business model, your need to operate in your existing market, and your need to own an industrial property, as opposed to lease, is certainly worth consideration as the demand for your product is higher than may have ever imagined.

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