A 1955 ad in this publication from Public Service Electric and Gas Co. (PSEG) in Newark depicted the crook in the Delaware River where New Jersey and Pennsylvania meet not far from New York as "industrial elbow room," complete with an illustration of a flexing arm and clenched fist.
Today's crowded industrial landscape in the region doesn't afford much wiggle room at all. With 14.9 million sq. ft. (1.38 million sq. m.) of occupancy gains in 2018, New Jersey has now exceeded 10 million sq. ft. (929,000 sq. m.) in annual absorption for five years in a row, for a total of more than 67 million sq. ft. (6.2 million sq. m.), Cushman & Wakefield reported.
“The three-year stretch from 2016 to 2018 has been the strongest run for New Jersey industrial market occupancy gains and one of the most robust stretches for leasing in recent history," said Cushman & Wakefield’s Andrew Judd, New Jersey market leader. "We also are coming off the best back-to-back years for new construction completions this century. Much of this can be credited to the rise of e-commerce, strong import totals at the port, a healthy economy and robust retail sales.”
Creative redevelopment is just as robust, allowing some companies to flex and grow even in a tight marketplace.
In January, PSEG Power announced the sale of the sites of its retired Hudson Generating Station in Jersey City/Secaucus and Mercer Generating Station in Hamilton Township — two coal-burning power plants built in the 1960s and retired in 2017. But rather than convert to gas-fired power plants as so many electricity generation plants across the country are doing, these sites are destined for a full makeover.
Last year, PSEG set the goal of eliminating 13 million metric tons of CO2-equivalent emissions by 2030 from 2005 levels. So the purchaser — Chicago-based Hilco Redevelopment Partners (HRP) — plans to redevelop the sites as industrial parks to serve the growing need for regional warehouse distribution hubs in central and northern New Jersey.
"We hope these sites will continue to be productive assets for the communities that hosted the plants for decades,” John Paul Cowan, senior vice president of operations for PSEG Fossil, said in a release. “That’s why we sought out a buyer that understands the strategic value of both locations and will leverage the great labor pool in the surrounding areas. Hilco Redevelopment Partners has a track record of success taking on both the remediation of these types of industrial facilities and, most importantly, redeveloping them into economic engines for the people who live in and around the sites.”
HRP also recently acquired retired coal power facilities from Exelon in Boston and NRG in Chicago, in addition to its portfolio of redevelopment sites that includes the former Bethlehem Steel site in Baltimore now known as the Tradepoint Atlantic logistics hub.
“Our goal with every redevelopment project is to return economic vitality to these dormant industrial sites, giving them a new purpose and generating new strategic opportunities,” HRP CEO Roberto Perez said. “The locations of both the Hudson and Mercer sites offer transformational opportunities to reposition underutilized land into modern industrial parks in one of the strongest warehouse/distribution center regions in the entire country.”
“The Hilco Redevelopment team has developed a strong reputation for taking on these types of large-scale industrial development projects across the country, having previously purchased obsolete coal-fired power plants from NRG and Exelon," said Hilco Global Chairman and CEO Jeff Hecktman. "These are unique projects that require a special skill set in order to bring new economic development and jobs back to communities.
How many coal-burning power plant sites are in the national redevelopment mix?
"Nationwide we tracked around 20 coal power plant retirements in the U.S.," says Dan French, CEO of Brownfield Listings. He expects around two dozen more this year. "Natural gas is simply here to stay, thanks to U.S. superabundance," he continues. "So much so, the fundamentals of coal's future are dim whether or not improvements in renewables and batteries continue. Technology will continue to improve, of course, and with Lockheed Martin bringing its patented compact fusion reactor into production and multiple patents for solid-state batteries awarded in the last 18 months, the future of power generation is going to look a lot different. And soon.
"Eventually, even the coal plants being converted to natural gas will need retiring and we'll go through another round of redevelopment," he says, noting the viability of alternative uses such as habitat, recreation or "brightfields," i.e. sites conducive to solar power development. "The ones in good locations will have more reuse options, like any brownfield, but most coal-fired power plants are not in locations where the highest and best use is obvious, easy or immediately available. It takes work. Fortunately, we've got more real, capable redevelopers than we've ever had. So, the Hilcos and ELTs of the world are out there looking to take on the sites that can be redeveloped in this cycle. ELT picked up the Brayton Point Power Station last year. Ironically, the Brayton Point Power Station just finished those brand new hyperbolic cooling towers (to eliminate thermal pollution into the bay) a handful of years ago. How quickly obsolescence can strike."
Other locations throughout the region are being redeveloped, repurposed and re-occupied to avoid that dreaded "obsolete" tag.
In Greater Philadelphia, Somerset Properties spent more than $10 million redeveloping a property in Fort Washington, Pennsylvania, including the conversion of former warehouse space to loft office space. In January, residential developer Toll Brothers committed to a new corporate headquarters there through a long-term lease arranged by CBRE. Toll Brothers is expected to relocate its approximately 900 employees from their current space in Horsham, Pennsylvania, in the fall of 2019.
“We were founded in the Philadelphia area over 50 years ago and wanted a new home in the region that would energize our organization and set us up for future growth,” stated Douglas C. Yearley, Jr., Chairman and CEO of Toll Brothers. “We were also looking for a site that is close enough to our current location to be convenient for employees, while still befitting a Fortune 500 company like Toll Brothers. We finally found it at 1140 Virginia Drive. To help us transform the space, we’re working with D2, a nationally acclaimed design firm that specializes in creating inspiring workplaces. We’re completely renovating the interior and putting a Toll Brothers stamp on the exterior, creating a state-of-the-art facility that will excite current and future employees and support our business for years to come.”
It's a Wrap
Crepini, a maker of crepes and other bread and wrap alternatives, has outgrown its space at the Brooklyn Meat Market, so is increasing its production capacity by 500 percent with a relocation to iPark, the name given to the former IBM campus in East Fishkill, New York, in the Mid-Hudson Valley. The custom-built 33,000-sq.-ft. facility in Dutchess County will bring an estimated 108 new jobs to the area. (It also comes as IBM plans to invest over $2 billion to grow its high-tech footprint at the SUNY Polytechnic Institute campus in Albany and throughout New York State.)
In addition to other local incentives, Crepini received $2.5 million in Excelsior Jobs Program tax credits from Empire State Development. "We are excited to see Crepini move into new and improved space in the former IBM campus in East Fishkill," said Empire State Development President, CEO and Commissioner Howard Zemsky. "ESD is proud to revitalize existing facilities and help New York companies expand in the Mid-Hudson region and throughout the state.”
Crepini co-founders Paula and Eric Rimer immigrated from Russia to the United States in the 1970s when they were 10 years old. "Special gratitude to the Rimer family for detouring in Paris, France, in January 1972 to meet aunts and cousins," they say on their website. "It was during that trip overseas on their way to New York where the Russian blini met the French crêpe." The two did IT work for Fortune 500 firms before striking out on their own in 2007 with the Crepini idea.
In thanking various jurisdictions and organizations for grants and other incentives, Paula Rimer, CEO, said, "We are committed to giving back to the state that has been our home since we immigrated to America. Through our family’s hard work and growth, we are now able to create more than 108 new jobs for other hard-working New Yorkers in the Hudson Valley and continue to work towards our goal of having Crepini products on every table in America. We are truly living the American dream.”
From Petroleum Tanks to Transport Terminal
Another immigration story is unfolding on Staten Island, where a $40-million loan through the federal EB-5 program has been repaid in full and on time by CanAm Enterprises, which has repaid more than $1 billion in EB-5 capital over 37 loans. This time the funds have gone toward the first phase of construction of the Gulfport Marine Terminal, which has created 1,671 jobs within the geographic boundaries of the New York Metropolitan Regional Center area defined by the EB-5 program. Subsequent phases of the construction project are underway with nearly 2 million sq. ft. of industrial logistics center space completed.
The Gulfport Marine Terminal is being built on a 674-acre (273-hectare) tract of vacant land located on the Arthur Kill waterfront in Staten Island, Richmond County, New York. "The terminal features a 135-acre [55-hectare] area, which is ready for development of a full-service port facility, and a 193-acre on-site logistics center," CanAm noted in a press release. A 1-million-sq.-ft. (929,000-sq.-m.) building occupied by Ikea opened in August 2018, and an 850,000-sq.-ft. (78,965-sq.-m.) robotics-enhanced fulfillment center for Amazon opened in September 2018, marking the first fulfillment center Amazon has located within New York City — even as its HQ2 pulled out of town five months later. Both companies are now the largest employers in the borough.
The overall property's history includes tales of hidden secrets by organized crime, a large tank farm and the ill-fated attempt to develop New York's first NASCAR race track.
The EB-5 Immigrant Investor Program administered by the United States Citizenship and Immigration Services (USCIS) provides qualified foreign investors with the opportunity to earn "conditional" or temporary two-year visas in return for investing $500,000 in businesses located in high unemployment areas that create or retain at least 10 permanent full-time jobs for U.S. workers. The legal conditions for EB-5 visas have been fully met, meaning all 80 foreign investors qualify for receiving permanent residency in the United States.
"I am genuinely proud of the Gulfport Marine Terminal project — it shows that EB-5 is a great source of funding for industrial facilities that positively impact the surrounding areas, creating many direct and indirect jobs," said Tom Rosenfeld, CanAm's president and CEO.