On 9.27.19, State Broadcast News (SBN) interviewed Jeff Milanaik of Bridge Development Partners about the company’s distribution center project planned for Sunset Industrial Park. Mr. Milanaik is listed as a “Partner, Northeast Region” for Bridge.
According to SBN, the interview took place after Mr. Milanaik had spoken at the NAIOP I.CON East conference in Jersey City. NAIOP describes itself as “one of North America’s largest, most prestigious and valuable commercial real estate organizations.”
An audio recording of the interview was posted on the SBN website. (I received a Google Alert for the interview because I get alerts for stories mentioning the phrase “Sunset Industrial Park.”)
The interview is available here for download on the SBN website, and also available here for direct download. The discussion with Mr. Milanaik starts at about the 33:25 mark.
I typed a transcript of the conversation which can be found below. Some highlights follow (direct quotations from Mr. Milanaik and the host are in italics):
Mr. Milanaik suggests that the project’s primary target markets are in Williamsburg and Long Island City: “In discussions with the retailers, they showed me a map, actually, is what happened, of the tri-state area, and it was like a heat map, and it showed five areas that were red. Two I immediately recognized on the Jersey Side as Hoboken and Jersey City. One was midtown Manhattan, which I thought about, but then realized that people get their goods shipped to the office. The other two were way over on the other side of New York: Williamsburg, Brooklyn and Long Island City. And I said, OK, and they’re target markets because they’re high-earning millennials, pure and simple. We need to get to them, last-mile, just-in-time. That then began the search of, well, what’s the most efficient way to get there? And if you’ve driven across Manhattan, you’ve realized that it’s not ever really a good idea to try to do. So while I could service out of my existing distribution centers – Hoboken, Jersey City, arguably mid-town – you can’t effectively get to Williamsburg and Long Island City. And the population numbers, I don’t have at my fingertips, but they’re very high concentrations in millions of people.”
How goods will arrive at the distribution center and be shipped out of it: “And that’s kind of the four story concept we came up with, with ramping to each of the floors, because I believe that the inbound freight side will come out of the port of New York-New Jersey, meaning Elizabeth, it will come up Route 278, large trucks, drop the goods off at night, they’ll get sorted, whatever, and then early morning, there will be Sprinter vans, Ubers – because last mile in the boroughs, if you’ve driven any of the borough streets, are extremely narrow. You’re not going to get trucks through them of any degree – and they’re going to be small delivery vans making the touch, like a FedEx van, even, as an example.”
The site’s workforce: “And while I love building buildings and setting distribution operations up, they can’t do it unless you have a workforce. So part of our investigations any time we do this is looking at available workforce, how do they get there. And we’re fortunate with the amount of housing in the area that does exist, and the mass transit lines, the many subways, we have an abundance of workforce.”
Potential clients are e-commerce, but also smaller, local companies: “Well, there’s a lot of discussion on e-commerce. This entire conference had a lot of conversation on e-commerce. We’ve done quite a bit of that business ourselves, too, in New Jersey over the past few years. I do believe, I guess a good example would be one of the customers we just signed up and we’re doing a building for, I approached them and said, look, we have this property, and we’re in the design stages of this, we’d like to get your input, figure out, are we thinking right, what would you do differently, so we have an opportunity to do it right, and you can only have one shot at doing this, so why not inquire. So we had conversations, and the very first thing they said was, we have to be there. It wasn’t like a maybe or we’re thinking about it – we absolutely have to be there. We don’t know how we’re going to service that yet. That may be generation ten of our material handling system. Now, I can’t imagine, but ten is much further than generation one. And the comment was, probably like we do it overseas. So they’re already starting to think in that direction. But then they said, but if you’re three years out, I’ve got too much to do right now, so we’ll talk to you shortly, because there’s such an appetite, as you heard, for space to service that.”
“So yes, I do believe there’s going to be strong interest. We’ve had some initial interest already from third-party logistics that are serving e-commerce companies that we know who they are and what they’re doing. We’re just not really quite ready. But my philosophy has always been, to be successful in the industrial business regardless, keep the building generic enough, keep it so it’s divisible for the right sizes. As I said, these buildings will divide down to 30, 40 thousand square foot users. That means, yes I can handle large e-commerce users. But it also means I can accommodate the small, neighborhood user that may be restaurant equipment or food service or somewhere like that, serving the greater population. So our concept is to keep it generic enough to accept any and all users.”
Project time frame: “So, right now we’re kind of stabilizing the site. As I mentioned to you, we’ve got to relocate a existing person who actually owns a building on the site. We’ve reached (an) agreement with how we’re going to do that. Beginning in January of ‘20, we’re going to finalize, start working hard on the design. It takes about a year or so, 14 months to get building permits out of New York City. So we’re anticipating breaking ground hopefully in the first quarter of ‘21.”
“Host: Great. And in operation by when, do you think?”
“JM: I think probably 24, 36 months from now, if I were to guess.”
Milanaik suggests that a positive aspect of the project is that it will not have to go through the ULURP process: “Now Brooklyn and New York, it is, even though I’ve been developing in New Jersey and around the country since 1987, I know what I don’t know, and I knew I didn’t know how to navigate the New York building process, approval process, which is why we partnered up with THPH. The unique thing there is, you have to buy property based on FAR, which is an unusual concept, floor-area ratio. So, if you have a property of 20,000 square feet, as an example, you can build 40,000 square feet on it as-of-right. And it just multiplies from there. The other nice part is that as long as you can conform with the building ordinances and codes, your building is technically as-of-right as well, so all you do is pull building permits. So, it’s challenging on one hand, but you avoid the whole site plan process on the other.”
On the overall market for distribution centers and the availability of industrial land:
“Host: And as you look at the market over the next 12-18 months, are you seeing pretty strong demand for more development? Are you seeing things start to level off? Where are things going?”
“JM: No, it’s mind-boggling to me, the demand. Well, let me rephrase that. The question I’ll pose is, is the demand stronger, or is the supply that much shorter, which increases the overall demand? And the reason I say that, having been developing in Jersey over the years, many years ago, a former governor put together a plan called, we in the development side affectionately referred to it as “The Red Map.” I don’t know if you may remember that. And it was the state of New Jersey, and it was, targeted areas that were green where he would encourage growth, and there were big swaths of red that were throughout the plain, like the Highlands, where you couldn’t develop. And I was president of New Jersey NAIOP during that period. And all the conversations with our engineers who were analyzing the impact, they said, do you realize you’re going to be out of industrial space in New Jersey in ten years? And I’m like, scoffed at it, because I’d been building on green fields forever. They couldn’t have been more realistic. So the stuff that we’re doing over there with reclaiming old industrial sites is because there’s no supply. If you take that onto the borough side, it’s even a tighter supply.”
The full transcript follows: Continue reading “9.27.19 – Sunset Industrial Park developer suggests primary market is “high-earning millennials” in Williamsburg and Long Island City” →
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