South Jersey's New Competitive Streak
The Economic Opportunity Act of 2013 was enacted to rekindle the Garden State (does it require a new Bruce Springsteen album be released every 16 months?). And as we learned our recent third annual Future of South Jersey Summit at The Westin Mt. Laurel, it's already had a giant impact on local development.
NJEDA community development director Margie Piliere told the audience of 300 that $433M in incentives have been approved for 10 South Jersey projects since November, including the 76ers’ practice complex and the new Holtec port facility that are both planned for Camden. The law was a much-needed update to previous tax credit programs, she says, as it made adjustments for South Jersey’s smaller office and workforce sizes compared to the northern part of the state and lowered the minimum capital investment and job creation requirements.
Here's JLL EVP Rick Widerman, who moderated the panel discussion. Still, the application process remains rigorous, Margie says: companies still must generate a 110% net benefit to the state and demonstrate that they have created jobs before receiving the credits over a 10-year period. She thinks that Camden, one of four targeted Garden State Growth Zones, will be so active because of the new law it will be “unrecognizable” in the next five years.
Can EO13 offer rectitude to the office market? Brandywine Realty EVP George Sowa says the story of South Jersey is one of a divide between its two biggest counties. Burlington County’s Q2 vacancy rate of 9.7% was the lowest since 2002, but Camden County’s remains above 20%, and its absorption (negative 700k SF since 2008) also stands in sharp contrast to Burlington’s gain of 555k SF. George says that preference for proximity to the Turnpike trumps proximity to Philadelphia, and better-class, newer properties are giving Burlington County the edge; it’s where Brandywine does 62% of its activity in South Jersey.
Whitesell’s Haines Center is one of those Burl Co successes: VP James Whitesell says it's erecting two new distribution centers totaling 1.1M SF for two tenants, one of them Destination Maternity arriving from Philadelphia. He's aware of the economic ping-pong match with Pennsylvania (to where Ocean Spray is headed) but welcomes the opportunity to showcase its former building as Whitesell reacquires it. Overall, James says, Whitesell has good debt levels on its properties and at exit 6A, benefits from cheaper rents and more available land than upstate, as well as the adjacent PA Turnpike connection. He feels the boom will be enhanced further by the NJ Turnpike widening in anticipation of more bustling port activity.
Pureland Group partner Charlie Walters has seen industry pick up in Gloucester County as well. Mullica Hill Foods, Goya, and Five Below have signed deals for more than 500k SF facilities at Pureland Industrial Complex, where deals were formerly in the 50k to 250k SF range. With the rise in overnight delivery, though, he sees distribution center deals eventually returning to 100k SF. On the finance side, lenders are less conservative today and stimulating refis with higher LTVs with less concern about outstanding balances.
Gloucester County Dept of Economic Development acting director Tom Bianco is looking forward to the role of private/public partnerships in strengthening New Jersey’s competitiveness. There’s more to come to Gloucester through the 150-acre Paulsboro Marine Terminal, to be developed by Holt Logistics with South Jersey Port Corp, which will be the first new port on the Delaware River in 50 years. Direct access to I-295 will help with traffic alleviation, and Tom sees the potential for Glassboro to join Newark and Camden on the shortlist of busiest port facilities.
And there’s never a dull moment for multifamily: Conifer Realty VP Sam Leone says growth has been continuous since the nadir of the recession, and Conifer’s more than 3,000 apartments in South Jersey are nearing 98% occupancy. There's some overbuilding in seniors housing, but it has benefited old school buildings through historic tax credit renos, four of which Conifer has undertaken the last two years. Sandy recovery funds are also helping grow multifamily near the shore; Sam says it's planning developments that will cover Atlantic, Cape May, and Cumberland Counties as well as its base in Burlington.
Thanks to event sponsor M&T Bank, which just opened its Cherry Hill office at Brandywine’s Woodland Falls Corporate Park. Regional prez Ira Brown calls South Jersey a natural extension of their market, and he's excited to have lending and wealth management teams on the ground at a branch that will eventually have 23 staff.