SADDLE BROOK, NJ——The NewJersey industrial market ended the second quarter of 2014 withpositive momentum, as increased demand for large blocks of spacecontinued to drive net absorption and kept vacancy rates low,CBRE Group tells GlobeSt.comexclusively in a preview of its Q2 2014 New JerseyIndustrial MarketView.

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The second quarter closed with positive net absorption of 2.64million square feet, and availability at 9.2 percent, the lowestsince 2008. The most active areas were the Meadowlands and HudsonWaterfront in Northern New Jersey and Exit 8A in Central NewJersey. Total leasing activity was 6.26 million sq. ft., a39-percent increase over the first quarter.

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Demand for industrial space was driven mostly by logistics,food, and apparel companies, which accounted for more than 24percent, 14 percent, and 8 percent of total occupier transactions,respectively. Amazon.com expanded its New Jerseyfootprint, bringing its total occupancy throughout the state to1.92 million square feet. Expansions by FergusonEnterprises and Marcraft Apparel alsodemonstrated the strength of the market.

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“Activity at the New York and New Jersey port terminals remainsstrong, which typically spurs growth for the surrounding New Jerseyindustrial real estate market,” says CBRE's MindyLissner, an author of the report. “The Port Authority iscontinuing to upgrade port infrastructure in preparation for thelarger cargo vessels that will pass through the Panama Canalstarting in 2015, adding to the strengthening fundamentals in thesector.” As the largest port on the East Coast and the thirdlargest in the US, the Port of New York and New Jersey is apassageway to one of the largest and most important consumermarkets in the world.

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Class A properties continue to outperform the overall industrialmarket, with 6.5 percent availability vs. 8.6 percent last quarter,and compared with New Jersey's overall current availability of 9.2percent.

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Class A leasing accounted for a disproportionate 38.6% ofthe state's total leasing activity. Class A product accounts forjust 7.7% of the total inventory.

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With the supply of Class A industrial properties limited,industrial construction continues to rise. In the second quarter,developers broke ground for five new projects totaling 1.18million square feet. That brings New Jersey's current total to 26projects totaling 10.24 million square feet under construction.

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“Speculative development continues to account for approximately60 percent of the total square footage under construction. However,despite an aggressive delivery schedule for new warehouses, thereare several companies like Dawn Foods andAmazon.com that have committed to these new spacesprior to construction being completed,” says CBRE's MattCorpuel. “With several significant requirements stillfocusing on the New Jersey market, the demand pipeline is strongand will minimize any negative impact from new supply.”

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The average asking lease rate for industrial space in New Jerseycontinued climbing steadily once again in the second quarter. At$5.49 per square foot, this is the highest rate seen in four years.Supply constraints and demand for modern, high-priced facilitieswill continue to be a driving force behind lease rate increases.With only three of the State's 24 submarkets reaching or exceedingtheir 2007 peak lease rates, there remains significant upsidepotential for rental rates. The spread between industrial askingrates and taking rates is also at its lowest point since thefinancial downturn.

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New Jersey's average asking sale rate for industrial space isnow $63.40 per square foot. Northern New Jersey's rate droppedslightly to $69.85 per square foot, and Central New Jersey's rateincreased to $57.69 per square foot. While sales activity in 2013was the highest volume of investment purchases the New Jerseyindustrial market has seen historically, the sales activity in Q22014 can mostly be attributed to an increase in useracquisitions.

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New Jersey's industrial market has recovered significantly sinceregistering nearly 50 million sq. ft. of negative net absorptionfrom 2007 through 2010.

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Steve Lubetkin

Steve Lubetkin is the New Jersey and Philadelphia editor for GlobeSt.com. He is currently filling in covering Chicago and Midwest markets until a new permanent editor is named. He previously filled in covering Atlanta. Steve’s journalism background includes print and broadcast reporting for NJ news organizations. His audio and video work for GlobeSt.com has been honored by the Garden State Journalists Association, and he has also been recognized for video by the New Jersey Chapter of the Society of Professional Journalists. He has produced audio podcasts on CRE topics for the NAR Commercial Division and the CCIM Institute. Steve has also served (from August 2017 to March 2018) as national broadcast news correspondent for CEOReport.com, a news website focused on practical advice for senior executives in small- and medium-sized companies. Steve also reports on-camera and covers conferences for NJSpotlight.com, a public policy news coverage website focused on New Jersey government and industry; and for clients of StateBroadcastNews.com, a division of The Lubetkin Media Companies LLC. Steve has been the computer columnist for the Jewish Community Voice of Southern New Jersey, since 1996. Steve is co-author, with Toronto-based podcasting pioneer Donna Papacosta, of the book, The Business of Podcasting: How to Take Your Podcasting Passion from the Personal to the Professional. You can email Steve at [email protected].