The Real Deal New York

Developers are scrambling to meet growing demand for warehouse space

E-commerce is driving up demand for industrial sites
September 19, 2018 02:30PM

An Amazon distribution center (Credit: iStock)

With manufacturing on the decline, developers are increasingly turning old industrial buildings into distribution centers.

According to a report by Newmark Knight Frank, e-commerce is driving demand for industrial properties that can be repositioned into or demolished to make way for distribution centers. Many of these warehouses are located in northern and central New Jersey, where sites offer quick access to highways, rails and ports. In Piscataway, the Rockefeller Group is turning a 228-acre site — formerly home to a Dow Chemical plastics factory — into five buildings that will span 2.1 million square feet for distribution use. Best Buy is the project’s first tenant, the New York Times reported.

In the past decade, the U.S. has lost roughly 640,000 manufacturing jobs, according to the Bureau of Labor Statistics. Thomas Hanna, president of Harvey Hanna & Associates, said that while “manufacturing isn’t entirely dead” his company couldn’t make the economics work to keep a former General Motors assembly plant in Delaware as a factory for luxury cars. Instead, the company will raze the plant to make way for four buildings designed for the logistics industry.

“Logistics is the fastest-growing segment within the real estate industry,” Hanna said. “Everyone is trying to figure out how to get their product to the consumer the fastest.”

In 2014, Amazon opened a miniature warehouse in Manhattan at Vornado Realty Trust’s 7 West 34th Street. Last year, the company announced that it would open its first large-scale distribution center in the city at Matrix Development Group’s 546 Gulf Avenue in Staten Island. [NYT] — Kathryn Brenzel