By: Conor Eckert, VP of Business Attraction – Orange County Partnership

We are living in the “polycrisis era” of industrial real estate - numerous risk factors are impacting development, construction, and site selection activity in the local and macro environments. Political uncertainty, interest rate volatility, and an ever-changing regulatory landscape are all factors driving risk. However, Orange County is still growing its position as a cost-effective alternative to Northern New Jersey, boasting similar market access, the availability of sites, and the availability of buildings at lower rental rates than competitor markets. Despite headwinds, site selection interest remains generally steady in the market - but the impetus is on us in the economic development community to de-risk our market. 

Tenant Activity:

We have seen an uptick in substantive site selection requests in Q3 and the resurgence of discussions with viable projects that have lingered in the market. The sectors that we’re seeing activity in are logistics, life sciences, packaging, cannabis, construction supplies, and energy-related projects. From a transactional perspective, it appears that the manufacturing-oriented projects are more interested in owning their real estate, while the logistics users are more interested in lease or lease-to-own opportunities. The energy projects that we are seeing are generally tied to the offshore wind supply chain/component parts and opportunities to access Inflation Reduction Act monies from the Federal Government. 

Development Activity:

Local, regional, and national developers continue to advance sites across the Orange County market – including Scannell Properties, Crow, RDM, Frassetto, Ridgecut Road, Treetop Development, Matrix Development, and others. This quarter, Crow will formally break ground on a 535,000-square-foot speculative industrial project at the Golden Triangle site in the Town of Wallkill.  Separately, there are a handful of large industrial projects proposed or soon to be proposed in southern Orange County. From a rental perspective, rents have continued to grow, recently crossing the $14-per-sf threshold in Montgomery. It is important to note that there has been an uptick in vacancies following closure announcements from a handful of local companies. These facilities are either on the market or soon to be – the product is a mix of modern logistics and unique manufacturing space.

Additionally, the Orange County Partnership and Orange County IDA secured $462,500 via the FAST NY site development program to help advance the forthcoming Aden Brook Business Park in the Town of Montgomery – a 100-acre farm site that will be positioned to accommodate advanced manufacturing. We are currently working on a handful of additional FAST NY opportunities to advance unique sites across the market.

Takeaways:

• Despite the uncertainty, we’re seeing an uptick in new site selection activity and developer interest. Additionally, projects that were previously paused are beginning to advance due diligence and deal discussions.
• Access to strong infrastructure remains a critical path item for most industrial prospects seeking sites in the market.
• Our pipeline of expansion projects has significantly increased this summer. The bulk of the expansions are in the manufacturing sector.
• Rents continue to climb – yet we still remain a cost-effective alternative to NJ. Projects like Golden Triangle are a strong indicator of confidence and belief in the Orange County/Hudson Valley market.