“Newark officials have taken the first steps in redeveloping some of the most troubled sections of the city’s air and sea ports, which when expanded and improved may lead to the creation of new businesses and jobs for residents.”
I am no big fan of government intervention in real estate whether it be rent regulations, restrictive zoning or eminent domain. In this case I have to say I am somewhat conflicted…
There is great potential from increasing the capacity and efficiency of the port. It is perhaps the most significant engine for economic growth in the city if not the region. The port will provide jobs across all levels of experience, increase tax revenues and increase the vibrancy of the greater Newark region.
The expansion of port capacity and operations is also significant as it corresponds to the expansion of the Panama Canal which will provide a direct sea cargo route for trade from China to the east coast of the United States, bypassing California ports and transfer to terrestrial shipping modes. Newark is poised to reap the greatest benefit from this as it already being the largest container port on the eastern seaboard, has perhaps the best linkages of any city in the Northeast, is located less than 20 miles of Manhattan, and is centrally located in the “Liberty Corridor” between Boston and Washington DC.
The conflict arises when the existing business and property owners are considered. These industrial business have been providing jobs and tax revenues for over 50 years in some cases and now are going to be arbitrarily dislocated by the current administration. They will be compensated for the value of their land however the ‘value’ paid to land owners in eminent domain cases is rarely the true market value. Another consideration is that land serves a different purpose for industrial users than any other instance of real estate. Industrial real estate acts more as a piece of equipment that is an essential part of an operation than just a location. Therefore displacing these business for the purpose of redeveloping the port must be done with great care and consideration for the existing business. See Full Article
For other industrial business and land owners the impact of this is tangential however potentially significant. The balance of supply and demand could be shifted significantly. When the government acts to redevelop industrial land for any use it creates a strain on the supply because there are very few areas where industrial uses are tolerated. A great example of this can be found in Brooklyn, NY. Over the past 10 years as industrial areas in Greenpoint, Williamsburg, Red Hook and Sunset Park were converted to residential neighborhoods lease rates and sell out values for industrial properties in other areas of the borough increased dramatically to the point where once undesirable areas became hot markets due to them being areas of last resort for industrial business in Brooklyn.
It will be interesting to see how this all comes to pass. I suspect that Mayor Booker’s team, led by Stefan Pryor, will bulldoze this through and use all of the powers of eminent domain to do so. I cannot say they are wrong for doing so, dealing with the existing property owners in any way would probably lead to nothing getting done and that is unacceptable. Whatever happens industrial landowners in and around Newark should keep their eyes and ears open for opportunities to capitalize on increased land values.
The below link is to a study of the port completed by NJIT. The findings are very interesting and will provide deeper background on the topic.
This is an archive article from the NYT from 1921 when another expansion of the port was proposed. An interesting bit of history…