New Jersey on
Logistics Main Line

Making operations operate better was a theme sounded by New Jersey Gov. James McGreevey in his January 2004 state of the state address. Coming on the heels of his 2003 smart growth initiatives and other rising costs, this is welcome news to corporations and their service providers. According to the Wall Street Journal, real estate transfer fees in the state have risen by "as much as 56 percent, depending on the sale price of the property."
        While the hurdles may be getting higher, however, there is evidence the state is working with businesses to clear them faster, through programs like brownfield redevelopment, the restructuring of state worker training programs and the establishment of incentive-laden "innovation zones" near universities.
        BASF Corp. has maintained its North American headquarters on a 155-acre (63-hectare) site in Mt. Olive, N.J., for the past decade, adding to the campus with expansion in 1996. All told, the company has invested $45.8 million in new plant equipment and construction at the site, which employs 1,262. The corporation paid $4.2 million in local and state taxes in 2002.
        Part of the reason other companies stay in Mt. Olive is its 300-acre (121-hectare) New Jersey Foreign Trade Zone (FTZ), attractive to BASF neighbors like UPS, Unilever and BMW. The FTZ is within the 684-acre (277-hectare), 7-million sq.-ft. (650,300-sq.-m.) International Trade Center, and is one of two New Jersey FTZ areas (under the same state-backed license) developed by Rockefeller Group Development Corp. (RGDC). The only space not built out in ITC is a pad ready for a 200,000-sq.-ft. (18,580-sq.-m.) building. RGDC is also involved in a joint venture with Atlanta-based IDI to develop FTZs for distribution and light industrial facilities nationwide, with five active projects and more in the pipeline.

Eugene Preston

        Eugene Preston, vice president for RGDC, says the FTZ's customs advantages go beyond the deferral of duties, pointing out that a manufacturing process might transform materials with a relatively high duty rate into finished goods with a lower duty rate, which would be the rate assessed upon those goods' departure from the zone. And a change in the FTZ regulations in 2000 made shipment reporting a weekly obligation instead of a task tied to every shipment transaction, saving some companies huge amounts in customs and broker fees.
        Preston also points out that companies go through a rigorous screening process in order to use an FTZ, meaning increased speed of operations in a security-conscious world. Asked to characterize the operational savings the FTZ confers, he says, "It would not be unusual for a company in a warehouse building with rent of $4.50 a square foot to save a dollar or more per square foot in customs duty savings. So it can be meaningful in a half-a-million-sq.-ft. [46,450-sq.-m.] building. But there are no hard and fast rules. You have to do a very detailed analysis."
        At the developer's Exit 8A location in Cranbury, a total of 1.7 million sq. ft. (157,930 sq. m.) could be built, including on the property formerly occupied by Carter Wallace, for which RGDC just received site approval. Such approvals are increasingly rare in a space-crunched market, especially for the huge consolidation facilities toward which most "optimizing" companies are migrating.
        "In New Jersey and in L.A., there are some pretty large barriers to entry," says Preston. "So to the extent you have land holdings that are properly zoned and approved, and have the right topographical features that allow for the development of larger buildings, the market is going to perform well."