By Davy James and Maria Prato-Gaines, Staff Writers
The recession is taking its toll on the local warehouse economy with about a fifth of the warehouse space around N.J. Turnpike Exit 8A remaining unoccupied.
Officials in towns surrounding the Turnpike interchange say said the total warehouse space in the corridor was about 60 million square feet, with 11.7 million square feet vacant. They say fewer commercial developers are coming to local land use boards and that tenants seeking local approvals have become scarce.
”This last year there have been very few, I’m trying to recall if there were any,” said Cranbury Township Committeeman Richard Stannard, who is a member of the Cranbury Planning Board.
Monroe Township Engineer Ernie Feist, who also sits on the township’s Planning Board, agreed.
”Over the last two years, certainly the number of applications coming before the Planning Board have literally come to a stop,” he said. “There are some developments that have been approved where construction hasn’t started.”
The high level of vacancy is a reflection of the trends in the real estate market since the beginning of the decade, according to James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy of Rutgers University.
”This is probably as close to the highest level of vacancy that we’ve seen in the post-World War II period,” Dr. Hughes said. “We had a significant amount of overbuilding between 2000 and 2007, which was, in retrospect, a period of epic abnormality. It was easy to get capital. There were loose-lending standards and over-consumption by New Jerseyans.”
Dr. Hughes said the period from 2000 to 2007 saw consumers using plastic credit, which caused their savings to become nonexistent.
”That was the greatest spending binge in the history of this planet where retail boomed,” he said. “It was a combination of consumption, which required more warehouse space for the shipping coming in and the huge volumes coming into our ports. That all unraveled in the last two years.”
The level of warehouse vacancy in the area is a direct result of the overbuilding that occurred and has been exacerbated because consumers have been forced to tighten their belts during the economic slump, according to Dr. Hughes.
”Household finances are still in bad shape with savings and financial assets taking a hit,” Dr. Hughes said. “Households are being forced to live a more sustainable lifestyle with less consumption and more savings, and that’s not very good for warehouses and goods distribution.”
Because he expects unemployment to continue to rise deep into 2010, Dr. Hughes said it could take several years for households to have improvements in their balance sheets. He said until labor markets stabilize and start producing jobs again, there would continue to be the same level of high vacancy rates.
Mr. Feist said warehouse building boomed in the Exit 8A corridor because it was midway between the Elizabeth and Philadelphia ports, with much of the construction being done on “spec” — or speculation, meaning they did not have tenants signed up.
”They were built on spec, which at the time seemed like a good idea — they were renting them out faster than they could build them,” he said.
The lull in development has had its affect on taxpayers, too, Mr. Stannard said. Warehouse owners who are unable to rent out their space can challenge their tax assessments and reduce the amount they pay in taxes, which has shifted more of the tax burden to residential property owners.
”There will always be vacancies but I think this is a consequence of the economy,” Mr. Stannard said.
The high level of vacancy in the area is indicative of trends across the state and the nation, according to South Brunswick Councilman Joseph Camarota.
”It’s certainly bad right now, and I think it’s a sign of the times and a reflection of the economy,” Mr. Camarota said, who serves as the council’s liaison to the township Industry and Commerce Commission,. “It’s also a reflection of our state and the way businesses as a whole are treated. The state is losing industry and commerce to Pennsylvania, and that’s a problem we need to look at.”
