The Impact of E-commerce on Industrial Space in New Jersey

Feb 24, 2016

Steve Pastor

It goes without saying that technology is dramatically changing the world, and the impact of e-commerce on industrial real estate in New Jersey is a prime example. How much of an impact? According to the Russell 3000 Index, Amazon generates more than 33% of all Internet revenue, and the products it sells have to be shipped from somewhere. Still there is more room for growth in this sector as Alibaba, the world’s largest online retailer based in China, has taken e-commerce platforms global and certain vendors have seen incredible growth rates after switching from Amazon.

For New Jersey, that means one million-square-foot, state-of-the-art distribution centers in Robbinsville and Carteret, and a food distribution warehouse in Woodbridge. But e-commerce is more than just Amazon and the requirements of companies in that business are changing the traditional “warehouse” in more ways than one. For instance, e-commerce is currently transforming the food sector, adding pressure to supermarkets and food vendors to make changes to their locations and operations.

From a design standpoint, the e-commerce distribution center breaks new ground in the technology it utilizes. It also reaches skyward—multi-level facilities are becoming common.

From a location standpoint, traditional distribution centers were located far from population centers in areas more adaptable to sprawling facilities. But those locations can hamper next-day delivery demands of consumers, resulting in the construction and conversion of facilities in more densely populated areas. Indeed, for smaller, specialized e-commerce distributors, urban in-fill locations come into play. Port proximity is another factor for receiving incoming product, and New Jersey’s port access has been key in development of facilities near the ports.

Questions remain. For densely populated states like New Jersey, availability of land is a serious issue. There is minimal prime land available and local resistance to development can be a factor. Urban in-fill locations are one response, as mentioned, with many locations garnering urban redevelopment support through state and local incentives. Land availability is also less of an issue the further south one ventures down the New Jersey Turnpike, as Amazon and others have demonstrated. The amount of new industrial construction from Exit 8A south is testament to that.

The modern e-commerce distribution center, by volume alone, also requires more truck or car parking and office space than the traditional facility, another issue coming into play in the development of new facilities and availability of land, particularly in the more heavily populated areas.

Because of the sheer volume of product shipped in and out of the modern e-commerce distribution centers, mezzanines have become an important packing or staging area. These structures are useful for buildings with a less-than-ideal layout and allows for additional, separated space. The volume of product also impacts hiring. Because of volume, such facilities are more labor-intensive. They create a substantial number of jobs, boosting the economy, but questions remain about whether enough qualified employees are available.

As demographics change, and people, particularly the younger generation, order online and want product delivered quickly or on the same day, e-commerce’s evolution will continue to have a substantial impact on industrial real estate in New Jersey. Given some of the industry’s growing pains in terms of land and employee availability, there will be some “casualties” among smaller e-commerce companies ill-prepared to respond. But dominant companies such as Amazon, as well as FedEx and UPS, among others, are well-equipped to respond and keep growing.

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