Crain’s New York Feature Article

Ben Rosen, VP of Leasing and Development in New Jersey, Shares his Insights

On April 25, 2022, Crain’s New York published it’s article, How to navigate the industrial real estate market when demand outstrips supply, featuring a Q&A session with Duke Realty’s own Ben Rosen.

How to navigate the industrial real estate market when demand outstrips supply

The e-commerce explosion has propelled another boom—one in demand for commercial warehouse space.

E-commerce sales hit $870.8 billion in 2021, up 14.2% since 2020, according to figures from the U.S. Census Bureau. As many manufacturers and distributors do all they can to keep products in stock and stay a step ahead of supply-chain issues, warehouse space is at a premium. Wary of industrial traffic, residents of some communities are fighting the addition of new warehouses. That makes it harder for landlords to address the gaps in the marketplace.

Companies will have to think creatively if they are looking to add to their supply chain in the New York metropolitan area. These companies will have to secure commercial warehouse space near both consumers and critical ports. Amid tremendous competition for sites that are strategically located, these companies will need to stay on top of new developments and perhaps consider using space in previously underused locations. For these companies, the good news is some communities are embracing industrial development to keep their economies robust.

For insight into the trends, Crain’s Content Studio spoke with Ben Rosen, vice president of leasing and development for Duke Realty in New Jersey. Duke Realty is a real estate investment trust that has built its growth strategy around acquiring and developing modern, well-situated facilities. It has grown its portfolio in New Jersey alone to 9.6 million square feet. One recent addition to its portfolio is 600 Ridge Road, a 469,600-square-foot industrial warehouse along the Interstate 287 corridor  in Piscataway, New Jersey. Duke also has begun construction of a 216,892-square-foot speculative development in Piscataway on a 21-acre site at 1570 South Washington Ave., 6 miles from Exit 10 on Interstate 95.

CRAIN’S: Demand for industrial real estate is high and supply is low. What factors are contributing to the high demand?

ROSEN: While e-commerce continues to be a major driver for local industrial real estate demand, recent demand has been impressively broad-based. Logistics companies are looking to increase network resilience and decrease delivery times. Retailers are augmenting inventory, improving supply chains and bolstering e-commerce capabilities to stay competitive. Food companies and distributors continue to look for space with minimal existing cold-storage options.

“While e-commerce continues to be a major driver for local industrial real estate demand, recent demand has been impressively broad-based.”

CRAIN’S: Are the market conditions that are causing high demand likely to change this year and in 2023? For instance, will e-commerce companies continue to need industrial space at similar rates?

ROSEN: It’s difficult to predict exactly how the demand will change in the long term, but I have a good view of the near-term industrial market. It’s safe to say that the market fundamentals are as strong as they have ever been, and demand is continuing to outpace supply. We have seen the rate of e-commerce growth taper somewhat from recent staggering highs, but I am bullish on e-commerce continuing to be a major demand driver for the foreseeable future.

CRAIN’S: What is being done in the market to improve the supply of industrial properties?

ROSEN: Developers and local municipalities must get creative to keep up with the robust demand in such a land-constrained market. The “highest and best use” analysis for sites across the state has shifted dramatically. Developers are investing in new locations, taking on environmental remediation that was previously cost-prohibitive, and redeveloping underutilized sites even if “underutilized” just means the site has an office building on it. The municipalities that have leaned into industrial development have benefited greatly with jobs, tax revenue, remediated sites and private investment.

CRAIN’S: How is the shortage of industrial space affecting lease prices?

ROSEN: Due to the acute lack of vacant space, landlords have been in a position to aggressively increase rents. Rents have been growing at an astounding pace, easily blowing past previous all-time highs.

CRAIN’S: What creative solutions are organizations that need industrial space using to address their needs in today’s market?

ROSEN: Desperate times call for desperate measures. Given the ultra-competitive and expensive landscape for industrial space, tenants must be aggressive in securing space and creative in maximizing the space they get. For example, we have seen a continued proliferation of automation to maximize efficiency and utilization, and innovations in automation contribute to the changing footprint of industrial facilities. Developers and landlords should work closely with tenants to address their evolving needs. What works for one tenant may not for another. That’s why fostering strong relationships is critical.