New Jersey has turned from the Garden State into the warehouse state. The local landscape is quickly transforming due to the recent land rush for warehouse space by developers, manufacturers, and distribution companies.
In fact, there’s been so much demand for industrial land that the state is struggling to keep up. A study by commercial real estate company Newmark shows that the warehouse shortage has caused rents for existing facilities to rise to a record $11 per square foot, while vacancies dropped down to 2.7%.
So what’s behind the rapidly growing demand for warehouses within the state? This article will help answer that question by going over current US demand for logistics centers, what New Jersey in particular has to offer, and the future of the state as a warehouse hub.
Table of Contents
Drone photo of future 71,056 Sq Ft Warehouse in Burlington, New Jersey
America’s Demand for Logistics Centers
The US has had a warehouse shortage for over 5 years now. In 2020, there were about 11,000 warehouses in North America covering over 4.7 billion square feet. But the US still needs to develop another 1 billion square feet of warehouse space by 2025 to meet the rising demand.
The rise in demand has many causes. For one, a growing ecommerce market has increased the need for logistics and distribution centers. With so many people shopping online these days, retailers need more infrastructure to process and deliver orders.
On top of that, consumers expect their orders to arrive faster than ever before. This is partly due to the precedent set by Amazon Prime’s free two-day shipping. To be competitive, retailers and distributors are trying to reduce shipping times by having more warehouses spread out throughout the country. This way, products are closer to the end consumer and have less distance to travel.
Of course, the ecommerce industry grew even larger when the COVID-19 pandemic started. With all the lockdowns and restrictions that were put in place, Americans had to rely more heavily on online shopping to get things they needed.
Video Credit: CNBC
At the same time, physical stores had to adapt as well by transitioning to online business models. That’s why Walmart and Target started offering no-contact delivery and pickup services, for example. And retailers who didn’t already have a strong distribution network suddenly needed to build one.
Another reason warehouse demand is growing is the increased reshoring of manufacturing. The US suffered many global supply chain and shortage issues during the pandemic because it outsources a lot of manufacturing overseas to countries like China. To minimize supply chain issues, many companies are now trying to manufacture their products closer to home. But they need more warehouse space and logistics centers to do that.
All these factors combined lead to a situation in which the US has too few warehouses. A record 96% of all existing industrial space in the country is leased already.
“It’s very difficult as a single e-commerce business to try to secure attractive space and run your business. The line of people trying to get into industrial buildings is out the door.”
- Vik Chawla, partner at Fifth Wall
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Why are so Many Warehouses Being Built in New Jersey?
The #1 market for warehouses in the US is the southern New Jersey and eastern Pennsylvania region. In the last quarter of 2021, 13.9 million square feet of warehouse was being built in New Jersey alone. And construction doesn’t appear to be slowing down anytime soon.
Drone photo of future 500,000 Sq Ft Warehouse in Pemberton, New Jersey
So why New Jersey? Well, there are many reasons. The state is:
- Centrally located between the major cities of New York City, Philadelphia, Baltimore, and Washington D.C.
- Home to the largest port on the East Coast and the second largest one in the nation, The Port of New York and New Jersey.
- Easy access to several major highways that connect to the rest of the country
- Home to a talented transportation, logistics, and distribution industry workforce
This is why Amazon started building warehouses here back in 2012 and why many warehouse buildings are now being leased before they are even done being built.
The Future of New Jersey as a Warehouse Hub
So what can we expect of New Jersey’s status of a distribution hub going forward?
Well, it’s already created thousands of new jobs for local residents. So the economy is hot. But current construction has yet to satisfy the demand for warehouses. And once free space runs out, developers will need to get creative.
One solution is to redevelop underused office parks. After all, COVID-19 forced many companies to downsize their offices as employees worked from home. So this makes for a great opportunity to expand warehouses using underused space.
Drone photo of an industrial park in Logan, New Jersey.
A potential bottleneck for warehouse development lies in the increasing demand for cold storage facilities. Many grocery stores are starting to offer online orders and delivery. But to make that work, they need cold storage facilities, and plenty of them—about another 100 million square feet.
Then there’s also been an attempt to curb the New Jersey “warehouse sprawl” with the state’s proposed Bill S-3688. It would require towns to receive approval from neighboring municipalities before constructing new warehouses. The bill was voted down in May, 2021, but if a revised version ever gets passed, it could dampen warehouse construction in the state.
That said, there are no signs that the New Jersey warehouse market is cooling down anytime soon. As warehouses increase, so will blue-collar jobs, and The Garden State may become the next big industrial sector of the US.
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