March 14, 2004 COMMERCIAL PROPERTY | NEW JERSEY Strong Demand for Industrial Sites With Rail Links By ANTOINETTE MARTIN Copyright 2004 The New York Times Company INDUSTRIAL brokers say they have first-hand evidence of a back-to-the-rails movement in the freight industry in New Jersey: sites with rail connections are hot properties. Over the years, rail had become somewhat outmoded because of its set schedule of delivery times, observed Frank Caccavo, a Cushman & Wakefield broker. "There was a time when rail companies did not fully participate in the time sensitivity of delivery," Mr. Caccavo said delicately. "With the modern manufacturing supply chain, from just-in-time production to the reduce-your-inventory model of warehousing, the handle-pack-reship mode of operation has been better suited to trucking in many ways." But he and other brokers point out that it has always been cheaper and more efficient to ship heavy bulk items by rail — and now that some improvements have been made in rail delivery, certain industries are simply demanding it. "We are seeing a tremendous demand for rail-served buildings right now," said Robert C. Kossar of Binswanger/Klatskin in Teterboro. "I have seen nothing like it in my 15 years in the business." Mr. Kossar said he was about to close a deal in the Newark area for a grocery concern, recently closed one just over the border in Eastern Pennsylvania for a lumber company and is currently searching for 250,000-square-foot rail-served buildings in New Jersey for a paper producer and for a recycling company. "We used to see a lot of times when rail was a `nice to have' when a company was looking for a site," Mr. Kossar said. "More and more now, it's a `must.' " Mr. Caccavo said he was working on a deal for a build-to-suit warehouse and storage yard for a construction products company at a rail-served site in Middlesex County. He also spoke of a large retailer that is seeking a 50-to-100-acre site, with a rail connection among the requirements. Mindy Lissner of CB Richard Ellis said her company is marketing seven sites with rail spurs that are either active or fairly easy to reactivate after a period of nonuse. "There is a great amount of activity with those buildings right now," she said. "The people that have been coming to look at the buildings have been coming because of rail. There are at least a couple of serious lookers at all the properties." The largest available rail-linked sites, Ms. Lissner said, include a 606,000-square-foot former Ford parts distribution plant in Teterboro, a 127-acre rail-served property owned by Dow Chemical in Piscataway and 262,000-square-foot and 400,000-square-foot properties in Jersey City. Mitchell Katz of Trammell Crow recently sought out a 470,000-square-foot rail-linked site in the Heller Industrial Park in South Brunswick for the Sappi Paper Company. He did it the old-fashioned way, Mr. Katz said, poring over street and aerial maps and walking the rail lines from Carteret to South Brunswick, looking for a suitable site. "My dad, Ben Katz, who was with Insignia/ESG, always told me, `Go out and look at the property to see what's there,' " Mr. Katz said. "In this case, I had to." "Because rail fell out of favor there for a while, information on what sites have it is really limited," Mr. Katz said. Sappi also wanted port access, since much of its product is shipped from Australia, he said, and that narrowed the list of potential sites. The paper company previously had warehouse-distribution facilities in Edison and in Allentown, Pa., and wanted to consolidate at one rail-served site in New Jersey, the broker said. Mr. Katz said his clients demanded rail service because it offers "huge savings," given the sizes of loads the paper industry ships. "A typical rail car can carry about 90 tons of paper," he said, "whereas a typical 58-foot trailer carries about 45 tons. So, rail means much fewer loads, greater efficiency and big savings. It also means greater speed of product to market." Sappi's warehouse-distribution facility is under construction now. It will have 36-foot ceilings, modern sprinkler systems and the use of a rail spur with a switch that diverts cars off the line and moves them through the warehouse bays for loading and unloading. Sappi signed a five-year lease, Mr. Katz said, and expects to take occupancy of the building in late summer. Ms. Lissner noted that use of port-to-rail, or "intermodal," transport is becoming increasingly popular. One factor, she said, is the increasing cost of fuel and trucking in general. Mr. Caccavo said he believed new trucking industry regulations were also driving shippers to use other means. "The trucking regulations that went into effect in January limit the drivers' working day," he said. "The clock starts ticking the moment they arrive in the parking lot, and the day ends 14 hours later — with a mandatory 10 to 11 hours off before the next shift." The new regulations provide longer mandatory off-duty breaks for drivers and shorter work time each day. Previously, drivers could be on duty for 24 hours straight. "A long time ago, all industry at one time used the rail," Ms. Lissner said. "Now there is a trend toward certain industries returning to rail: the paper industry, plastics, food, automotive industry, building supplies, steel. These are the industries using heavy materials and making heavy products." Mr. Caccavo said he had recently met with clients in the plastics industry who showed him the small, but exceedingly dense and heavy, plastic pellets that are their "raw" material. "The pellets are easily transferred from rail cars — they call them `hoppers' — to silos outside the building," Mr. Caccavo said. "Plastics is a high-volume, low-margin business, so they need multiple rail cars in at a time, as opposed to one car." WHEREAS rail users typically used to handle three or four car shipments a day, he said, today's rail users may process 10 to 30 rail shipments. Garbage is being shipped by rail out of the Northeast to landfills in the Midwest, he noted, calling that a "big business." Mr. Kossar and other brokers mentioned that large industries are also increasingly relying on rail to move hazardous waste materials. Ms. Lissner said there are many inactive rail spurs scattered throughout New Jersey. "In some cases, the spur switch was taken out," she said, "and sometimes the spot was paved over. "Certain users are interested in investing in reactivating the rail if the site fits their needs," Ms. Lissner said. "Some property owners will consider subsidizing the cost of putting in a track if a company that wants to move in is a heavy user of rail." Mr. Kossar said he was working on a deal in Newark, with a food industry client on the brink of signing a lease for a building that once had a rail link, which was removed by the last tenant. "The process we've gone through has been very time-consuming," he said. "First, we had to identify the property as one that had rail capability, ask people to refresh their memory, look up the information. Then, we had to make calls to determine who owns the rail and what line it is on and whether the railroad or the Port Authority regulates it. We had to find a railroad contractor who could repair and restore the track. "There is one outstanding issue in the negotiation now," he said, "involving what rights does the tenant have if the tenant can't get the rail activated by a certain date. As you can see, everything hinges on the rail."
Good article Johnny! Certainly many such sites exist in NJ. I would like to see more of that action on this side of the Hudson but a lot of the prime sites have long been plowed and paved over, both legally and illegally. Russ
For several of the recent decades, there has been a lack of foresight, and even overt anti-industrialism, as people rushed to get rid of those awful, noisy railroads, and their annoying tracks. I was active in some rail preservation efforts. Knowing it would be costly to reverse the process. Fighting to stem this headlong rush. Oops. Now it backfires. Suddenly a little dim light bulb comes on amongst the cobwebs in back of their minds. Guess maybe they are slowly, unsteadily discovering they moved too quickly, thoughtlessly. Sadly, the consumer pays the price in the end every time. Boxcab E50
Even though I have today's Times, I appreciate Russ sending me that article online. It's a shame that sidings have been cut off in lieu of trucks. Jersey is a pioneer in revamping rail lines compared to our fair city here. Just look at their incredible light rail system built from scratch in just a couple of years.
That is good news. I would like to know if it is happening elsewhere in a similar fashion. I have a feeling it is. It would also be great if we could get some photos of these new facilities.
Peirce, I sure would like to see it happen in New York. Ride the Long Island RR or the Metro North RR and see all the abandoned sidings along the way. The Cross Harbor Railroad is virtually dead because the City wants that land to build condos or whatever. There's a neighboring float operation and a huge yard that was rebuilt in the late 80's, and never used for more than storage for some CP railcars. I think it must have been completely empty for 15 years until CP came into the City. My Congressman, Jerry Nadler, has been fighting for 20 years for a rail freight tunnel to be built from Jersey into Brooklyn. No one cares!!!!!!!!!!!!! Here are stupid NYC politicians calling for the Oylmpics to come here for an estimated 8 to 12 BILLION dollars!!!!!!! The schools are crumbling and our once awesome railroads here are nothing but a fraction of what they once were. But, lets spend 200 million dollars to expand the #7 subway line west to new stadiums and as I write this the 2nd Ave subway line lies dead in the water as it has for the past 25 years. Tell that to the people who crowd onto the Lexington Ave Line. The Olympics. Maybe a million or two people will ride the expanded 7 train for a year or two. Eventually, some sports team moves into the new stadium. How in the world will any of this eventually repay 12 billion dollars????????????? No wonder the businesses (that haven't gone completely to another country) are leaving New York. I give Jersey much due credit. I rode their Light Rail a few years ago. It stopped at completely abandoned empty lots. When I went back, how about the dozens of office and apartment buildings I saw going up on those sites! Good damn planning.
This is exactly the point that must be made across the country. Here in Connecticut, the same problem exists. Tracks and rights of way are still in place, in many cases. They may need upgrading, but that is still less expensive than starting anew. Railroads did, and can again, spur economic development.
