Energy Access Replaces Location as Industrial Real Estate’s New Priority

                                       

By: Wiss Team

Wiss Team

“Location, location, location” is being challenged — energy access is now just as critical for industrial real estate.  Seeing this play out firsthand with NJ industrial clients, especially as power constraints and costs start influencing valuations, development timelines, and tenant demand. This article does a great job breaking down what’s happening in our market and is a worth a read for owners and investors in the industrial space.”

– Caitlin Macaluso, Partner, Real Estate, Wiss

The traditional real estate mantra of “location, location, location” is getting rewritten in industrial markets. Access to reliable, cost-effective power now outranks proximity to population centers and transportation networks in site selection decisions—a shift with significant implications for the New York-New Jersey industrial corridor.

New Jersey’s $2.8 Billion Year

Despite regional challenges, including sluggish rent growth and elevated vacancies, New Jersey posted $2.8 billion in industrial transactions for 2025, up 8.5% year-over-year. Average sale prices climbed 7.6% to $226 per square foot, establishing the market as the sixth-most expensive nationwide for industrial investment.

The market’s largest transaction: Prologis purchased 201 Middlesex Center Blvd., near Interstate 95, for $166.8 million. The deal exemplifies what’s still working in high-cost Northeast markets—institutional investors targeting quality properties where developable land remains scarce.

New Jersey’s industrial rents averaged $12.06 per square foot at year-end, well above the national benchmark of $8.87. Vacancy sat at 9.1%, roughly matching the national rate of 9.2%. Philadelphia, the region’s most accessible major market, averaged $8.60 per square foot with 8% vacancy—unchanged from the start of 2025, suggesting market stabilization.

Bridgeport, Connecticut, maintained one of the nation’s tightest leasing environments at just 5.8% vacancy, though that represented a 140-basis-point annual increase.

The Energy Security Factor

What’s driving the shift in site selection priorities isn’t theoretical. A Prologis survey found that 89% of supply chain executives experienced energy-related disruptions in the last 12 months. Another 83% believe the next supply chain crisis will be energy-related.

“As we anticipate an increase in construction starts, developments are being met with local concerns of resource consumption and greater scrutiny on ensuring a positive economic impact for the community,” noted Peter Kolaczynski, Director at Yardi Research.

The numbers explain the anxiety. Utility prices are rising while power-intensive sectors—data centers, advanced manufacturing—continue to drive peak demand. Developers are now prioritizing locations with reliable power networks and cost-effective energy over traditional logistics advantages.

This creates a particular challenge for Northeast markets, where energy costs historically have been higher than those in Southern and Midwestern markets. New Jersey’s high land costs and dense development already limit industrial expansion. Add energy infrastructure constraints, and the market faces compounding site selection obstacles.

Construction Pipeline Contraction

Nationally, just 357.4 million square feet of industrial space was under construction at year-start, projecting 1.7% inventory expansion. Last year’s deliveries totaled approximately 300 million square feet—the slowest construction year since 2017.

New Jersey had 6.36 million square feet under construction at year-end. Philadelphia showed 3.81 million square feet in the pipeline, while Bridgeport stood at 1.57 million—unchanged for two months, indicating neither new deliveries nor construction starts.

Projected market expansions from current construction hover around 1% of existing stock across the Northeast, reflecting subdued development activity. Compare that to Texas: Dallas-Fort Worth has 30.1 million square feet underway, and Houston shows 19.4 million.

The disparity isn’t just about available land. It’s about where developers can secure power infrastructure that supports modern industrial operations.

The USMCA Wild Card

The U.S.-Mexico-Canada Agreement is scheduled for review in July 2026. All three countries must agree to extend it another 16 years; failure to reach an agreement creates a 10-year gap before the USMCA sunsets.

For industrial developers focused on nearshoring and supply chain repositioning, this uncertainty complicates long-term planning. Much recent investment activity targeted shifting production capacity closer to U.S. markets. A shortened or sunsetting trade agreement could significantly alter those calculations.

What the Vacancy Plateau Means

National industrial vacancy hit 9.2%—twice the level from three years ago and 120 basis points higher than January 2025. But vacancies have plateaued in recent months, expected to continue through the first half of 2026 before tightening in the second half.

The e-commerce factor remains relevant. Q3 2025 e-commerce sales totaled $310 billion, up 5.1% year-over-year, representing 19.2% of core retail sales—the highest share since Q2 2020. Holiday season data showed e-commerce sales up 7% year over year.

That sustained demand provides a floor for industrial absorption, particularly in dense population markets like New York-New Jersey, where last-mile logistics remain critical.

Investment Implications

New Jersey’s transaction volume increases while construction remains muted suggests institutional capital still sees value in high-barrier markets with strong fundamentals. The question is whether energy infrastructure constraints limit future development potential or create competitive moats for existing well-positioned properties.

For industrial property investors in the Northeast corridor, the strategic calculus now includes:

• Power infrastructure capacity and reliability
• Energy cost competitiveness versus Southern/Midwestern alternatives
• Last-mile logistics advantages in dense population centers
• Land scarcity as a potential competitive advantage
• Tenant mix evolution toward less power-intensive operations

Nationally, average industrial sale prices increased 10% year-over-year to $135 per square foot. New Jersey’s $226 per square foot reflects a significant premium—one that requires corresponding operational advantages to justify.

The market’s high density, proximity to major ports, and e-commerce demand provide those advantages. Whether they’re sufficient to offset energy infrastructure limitations will determine whether the Northeast maintains its industrial investment appeal or cedes more ground to Sun Belt competitors.

Strategic Real Estate Advisory for Industrial Portfolios

Major shifts in industrial site selection criteria create both valuation risks and repositioning opportunities. Wiss’s Real Estate Advisory Services help industrial property owners, developers, and investors evaluate the impacts of energy infrastructure on asset valuations, analyze tenant mix vulnerabilities, and structure portfolio strategies for changing market dynamics.

Whether you’re assessing acquisition opportunities in high-barrier markets or evaluating disposition timing for energy-constrained properties, our team provides the financial modeling and strategic advisory you need.

Contact Wiss Real Estate Advisory to discuss your industrial property strategy.

Editorial Note: This article provides general information about industrial real estate market trends and does not constitute investment, legal, or tax advice. Property investors should consult with qualified advisors regarding specific investment decisions and market strategies. Wiss & Company LLP provides accounting, tax, and advisory services to commercial real estate owners, developers, and institutional investors in the New York-New Jersey metropolitan area and nationally.

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