The rise of e-commerce is driving demand for warehouses and industrial space, prompting some owners of commercial office buildings to convert their properties to ones of an industrial nature. In some suburban areas, industrial space is starting to show lower vacancy rates and command higher rents than those in the office sector.
In New Jersey and Long Island, owners of some suburban office buildings are already making the conversion, according to an article in the Wall Street Journal. The building owners are motivated by low vacancy rates of 1.8% for industrial space in Long Island and 4.6% in northern and central New Jersey, compared to a 14.3% vacancy rate for office space in Long Island and 24% in New Jersey. As a result of the shifting demand, prices of industrial space in Long Island have soared from $62.5 per square foot in 2013 to $96.8 today, while prices for industrial space in New Jersey jumped from $63.78 per square foot in 2013 to $74.84 today.
A case in point is that of the Sitex Group, which purchased a 60,000 square foot property on 7-acres in New Jersey a few years ago, only to convert it to an industrial property and sell it to a towel company for about $13 million, according to the WSJ article.