Stephen Schoch Managing Principal Kitchen & Associates
What are some of the unique opportunities in South Jersey? The fundamentals of South Jersey are not affected that much by the pandemic itself. It’s still about physical location and convenience. You’re close to the city but not necessarily right in the city. You’ve got very easy access to New York, Philly, Washington and Baltimore. The fact that people realized they can effectively work remotely is an opportunity in the residential sector. A lot of people are looking for housing, whether it be multifamily housing or even single-family houses, in locations farther away from their workplace as commuting becomes less of a factor. The notion that I can live in a small footprint because “the city is my living room” is changing. Every single project is rethinking things like unit square footage and whether to have that extra area for the home office so it doesn’t feel like you’re working on the kitchen table anymore. As a result, the market now is very active. If you don’t look and put an offer in on a new home or condo that goes on the market within 24 hours, you’re done. There’s so much demand on the for-sale side. It’s a real opportunity for residential development, especially entitled projects that are ready to start. What are the biggest challenges for your business? Rising costs are a huge challenge. A lot of what we do typically starts with the conversation to keep the building small enough so it can be built out of wood because that is traditionally cost-effective. But now the cost of wood-frame construction is going way up. Lumber has doubled – or more – in price in some areas. It’s not just lumber, it’s drywall, it’s all the basic building materials that you need to buy. It’s especially a challenge for affordable housing projects because the contractor must give a price before applying for the funding. You apply for the funding without knowing whether you have a real deal or not until about six to eight months later – and none of those prices are able to hold in this climate of price escalation. 68
| Invest: South Jersey 2021 | REAL ESTATE & CONSTRUCTION
Hybrid working due to the pandemic will have long-term effects on how future buildings are designed.
e-commerce growth by two years, e-commerce analyst Digital Commerce 360 reported in June. What was a vital way to buy almost any product was more than just a temporary solution as evidenced by the continuous growth of e-commerce sales in 2021. In total, U.S. online retail sales increased more than 32% year-over-year in 2020 and rose 39% in 1Q21, the research organization reported. The continued growth in e-commerce coupled with changing consumer preferences bodes well for warehouse and logistics companies and the industrial sector as a whole for the state and South Jersey in particular. More than 12 million square feet of industrial space was leased throughout New Jersey in Q2 led by e-commerce and third-party logistics companies, according to JLL’s 2Q21 Industrial Report. Unlike office, market indicators for the industrial sector point to a historic, record-breaking year for the industry. Total vacancy in the quarter sat at 2.5% statewide, with more than 14 million square feet under construction. About half of the new construction activity, or approximately 6.9 million square feet, is happening in the South Jersey submarket. Concessions are falling, direct and sublease rents are trending up, demand remains high and “developers are in the driver’s seat,” the brokerage reported. As of Q2, JLL is recording more than 26 million square feet of active requirements statewide, up from 25.5 million in Q1. “Expect 2021 to surpass 2020 as the market’s strongest year of leasing history. With Class
