The Jersey Rust Belt
Gets a Bit Brighter
DEMAND for industrial property is surging in northern New Jersey, prompting renewed interest in old and frequently decayed sections of once-vibrant manufacturing communities close to New York City.
Factory buildings in Hudson, Essex and Passaic Counties that sat idle for years because of the long decline in manufacturing are finding new uses.
''Old industrial properties that were looked on as eyesores are in demand again,'' said Scott Deutchman, a broker with SBWE Real Estate in Hasbrouck Heights. He said land values in places had risen so much that former warehouses in the Meadowlands were being converted to retail stores and companies are searching in towns like Harrison, Kearny, Newark and Paterson for old factories that can be converted to new uses.
''There has been so little building for so long in this state that we're running out of room,'' said Joseph R. Romano, executive vice president of Grubb & Ellis New Jersey. ''Older, urban areas were seen as less desirable, but if you need 100,000 square feet of space to grow your business and you can't find it anywhere else, you have to look there.''
Mr. Romano said the current situation provided a window of opportunity for some cities and towns of the northern part of the state to demonstrate that they have reduced crime to acceptable levels and are willing to accept businesses that would not be welcome in pricey suburbs before the next wave of commercial building gives companies the option of moving into campus-like sites farther south in the state.
According to figures collected by Grubb & Ellis, all the counties in northern New Jersey have vacancy rates for industrial property in single digits, with Bergen County the lowest at 6 percent in the fourth quarter of 1997, compared to 8 percent a year earlier. Vacancies for Bergen, Essex, Hudson and Passaic Counties have all dropped over the last year. In Hudson County, which includes such once-bustling but now decayed manufacturing areas as parts of Kearny and Harrison, the vacancy rate went from 9 percent in the fourth quarter of 1996 to about 7.5 percent in the fourth quarter of last year and the other two in the mid-7 percent range, down from 7.9 percent in Passaic and 8.5 percent in Essex.
Real estate executives said it was not likely that vacancy rates could go much lower, since most of the property left was functionally obsolete, with low ceilings and floors without the capacity to accept heavier loads even if the roof was raised.
One indication of the renewed appeal of northern New Jersey's industrial areas is the recent announcement by a New York-based film production company, the Shooting Gallery, of plans to build a studio and back lot in Harrison, in Hudson County, on a 30-acre property dominated by the old Worthington pump plant. A former Western Electric factory complex in Kearny that once employed 25,000 people manufacturing telephone equipment is now being operated as warehouses for tenants who like the Hudson County location near the Turnpike, the rail access and the proximity to the Newark air and sea ports.
Even Paterson, the first planned industrial community in the country when founded at Alexander Hamilton's behest in 1791, but well past its prime as a manufacturing center, is showing signs of revival. Old mill buildings in the Passaic County city have been converted into offices, retail stores and housing. And plans are being discussed to bring mixed development to the badly deteriorated heart of the city's Federal historic district.
The old industrial complexes that are being redeveloped have something that is in short supply in or near New York City: space. Stephen Carlis, the chief financial officer of Shooting Gallery, noted that the old factory buildings on the site had 60-foot ceilings, which leave plenty of room for sets and lighting.
''The whole site has 30 acres of land, which is just not available in Manhattan,'' he said. Mr. Carlis said the company, whose best-known film is ''Sling Blade,'' is planning to use the entire site as a back lot with facilities to do high-tech post-production work often lost to studio companies in California.
Another attraction, he said, was how close the site is to the company's principal offices in Manhattan. ''It's only six miles away,'' he said. ''We are still a New York film company. We have just expanded to New Jersey.''
Space and location are the themes, as well, at River Terminal Development Company, a 300-acre site at the confluence of the Passaic and Hackensack Rivers in Kearny. The site, which combines an old shipyard with the former Western Electric complex, has 5.4 million square feet of warehouse and distribution space and 40 acres of vacant land to build more if the need arises.
PART of the need for ever-more space is ever-bigger trucks, said Alan M. Lambiase, real estate sales manager for the privately owned River Terminal company.
''If you go back a few years, trailers were about 40 feet long,'' he said. ''Now that cargo box is as much as 53 feet, and when you add the tractor you are talking 80 linear feet.'' To back such a vehicle up to a loading dock requires from 110 to 140 feet of maneuvering space, something not easily done in more crowded locations.
Room to maneuver is becoming even more important because distributors do not like inventory piling up for long periods of time, tying up working capital. They want to move goods in and out more quickly, which means buildings are adding loading docks, forcing trucks to park more closely together.
''The old ratio was one dock per 10,000 square feet,'' Mr. Lambiase said. ''Now it is one per 7,500 square feet and, in some cases, one per 5,000 square feet.''
Most tenants at River Terminal are in some part of what is now called the logistics business, a combination of warehousing, distribution, repackaging and shipment preparation. ''You can't really make any money just warehousing anymore,'' he said. ''You have to do value-added work; it's almost like remanufacturing.''
Tenants include companies that handle distribution for garment companies, department and specialty stores and those that deal with perishable products, such as frozen food. He said access to both the sea and airports was important to companies whose business is moving goods quickly and efficiently.
The background of the property teaches lessons in industrial development. The eastern half was once a shipyard and later a ship-scrapping operation operated by River Terminal's parent company, Hugo Neu Corporation, which remains in the scrap business in other locations.
On the western side stands a building that is 50 feet wide but 700 feet long. Corporate records show that the building was once a Ford Motor Company assembly plant, complete with a small test track that still exists in altered form. Today the building is operated by River Terminal as a warehouse for tenants that have large seasonal swings in their inventory.
Paterson, conceived by Hamilton and planned by Pierre L'Enfant, the French engineer who laid out downtown Washington, was intended to be the nation's first industrial park. In the late 1700's, the power of falling water was the most efficient way to drive machinery, and with the 77-foot falls on the Passaic River, there was plenty of water with a long way to fall. The name derives from William Paterson, then the governor of New Jersey.
The same forces that drove manufacturers out of Kearny and Harrison were present in Paterson as well, although manufacturing still represents the largest category of employment in the city. But unlike Newark, which has experienced a sharp drop in population, Paterson's has held steady at about 150,000, fueled by a diverse stream of immigrants. City officials estimate more than 50 nationalities are represented among recent immigrants.
Some recovery has taken place. Of the 500,000 square feet of space that was once vacant in the old Continental Can building, only 50,000 remain. A. & P. remodeled annother old mill building adjacent to one of its stores and moved in 500 office workers.
Detailed real estate statistics are not kept town by town, but Deborah Hoffman, executive director of the Paterson Economic Development Corporation, said she knew of only two industrial sites larger than 50,000 square feet that were available in the city.
In the federally designated Great Falls Historic District, where a series of canals once directed water to the wheels of mills that spun silk and produced the first practical revolver pistol, an industrial revival is not likely. So developers have converted some mills to housing and mixed uses, talking advantage of various tax breaks and subsidies.
''This area was economically dead in the mid 1980's,'' said Lawrence E. Regan, the president of Regan Development of Yonkers. Most of the old mills had long since ceased to operate and many had been heavily damaged by fire.
But it had been recognized as an Urban Enterprise Zone, which meant funds were available to help offset the costs of development. Mill buildings were converted into housing for artists and others, with retail stores to serve the residents.
DEVELOPMENT in a historic district must be done with an eye toward preserving at least some of the past while meeting the needs of today. Mr. Regan is proposing a $21 million mixed-use development along the Passaic River that would include stabilizing and perhaps restoring the partly destroyed Colt Gun Mill at the corner of Van Houten and Mill Streets in the heart of the district.
The mill was the first to produce a practical revolver pistol, commencing operations in 1836. But the weapon was complicated and expensive, so the New Jersey company went bankrupt in 1842 and the building subsequently was used for textile production. The revolvers that won the West came from Connecticut and other places.
Nevertheless, because the weapons industry is considered by historians as the precursor for all mass manufacturing in this country, the Federal Government has pledged $4 million to help restore some of the raceways, water wheels and buildings in the historic district to show how the United States took its first steps toward industrialization.
Mr. Regan's proposed development, which would follow earlier mill renovations for housing, would include 30,000 square feet of commercial space, planned to include an art gallery, cooking school and a cafe, and 65 two-family housing units. Forty-five of the units would be partially subsidized, 20 of them market rate.
Trying to build in a historic district is a stiff challenge, Ms. Hoffman said. ''The developer just about needs an archeologist standing there every time he digs a hole,'' she said. ''Regan Development has revised its plan five or six times to be sensitive to the community and to history.''
George McLoof, whose Longstreet Development Company has also been active in the historic district, said the city's image as a tired mill town long past its prime was countered by reality.
''People are paying $30 to $40 a square foot for retail space along Main Street, and you don't see many vacancies,'' he said. ''If someone closes, someone else opens up pretty soon.'' He said the city's industrial past meant its infrastructure was well developed. ''There is a lot of underutilized electrical and gas capacity,'' he said.
Naturally, the past has left some problems as well. One of the few sizable development sites left in the city, an 11-acre parcel downstream from the historic district, includes the site of an old town gas plant operated by a predecessor of Public Service Electric & Gas Company.
Before pipelines were built to carry natural gas from states like Texas and Louisiana to the north, gas for cooking and lighting was generated by heating coal. It was often a sloppy process, and the ground below the old plant, which is adjacent to the river, is heavily contaminated with hydrocarbons.
One attempt by the utility to have a contractor solve the problem by digging up the soil and treating it failed, so it has been forced to take a different approach. ''There are about 11 acres available for development with restrictions,'' said Warren Straubmuller, a project manager for Public Service. One of these restrictions in on residential development, where the lingering effects of pollution could be a health hazard.
The most contaminated soil will be treated and capped, he said, adding that ''P.S.E. & G. will keep three acres as a gas distribution station,'' leaving eight acres available for others.
ONE drawback to development in urban locations is finding enough parking for cars. Mr. McLoof is working on a plan to build an entertainment center near the city's center that would include a multiscreen cinema, retail and office space and maybe a stage for live entertainment.
Since the block-square site is now a parking lot, he has to find a way to demonstrate to city planners that there will be adequate parking in the area if the open lot is supplanted by a building.
If finding a place to put a car after arriving in Paterson may be a problem, getting there is not. The city is split by the main east-west highway in the northern part of the state, Interstate 80. And there are access ramps in the city.
Like the other manufacturing centers in northern New Jersey, Paterson, Newark and the smaller cities and towns of the area are tightly linked with the rest of the national and international economy by a well-developed system of road, rail and ports.
''Logistically, there is no better place to be in New Jersey than Newark -- it just has an image problem,'' said Mr. Romano. ''There is a reason why the older cities are located where they are.''
