LITTLE FERRY, NJ—Rental rates in the industrial sector are poised for 'double digit' percentage increases this year, according to DTZ chief economist Kevin Thorpe, who spoke at the firm's client event at the Yogi Berra Museum & Learning Center on the campus of Montclair State University last night.

“New Jersey's industrials are unequivocally, absolutely booming,” Thorpe says. “Demand for industrial space is already looking at record territory and we see that continuing.” New Jersey ranks 12^th out of 382 metro areas for net industrial absorption, he told the group.

The New Jersey industrial sector is posed for strong rental price increases, largely due to the impending opening of greater access to New York/New Jersey ports via the Panama Canal, he says.

“Industrial rents are soaring,” he says, noting that New Jersey's rental rate growth has been lagging other areas, at around 2.7 percent. “It's not that robust, but it's coming. Very strong rent growth is coming to industrial for New Jersey.”

“When industrial vacancy in New Jersey comes down to about six percent, that seems to be a trigger. That's when we see double digit rent growth in New Jersey industrial,” Thorpe says. “I noticed that in 2000, I noticed that again in 2004, and when we run our baseline model, we have industrial vacancy coming down to six percent for New Jersey this year. Industrial rents are going to soar. That is right around the corner.”

From a tenant perspective, he says, “a deal signed sooner is going to be better than a deal signed later.”

In the last three years, New Jersey created 315,000 net new jobs, but even though that was a record, the state still lags other parts of the country.

“New Jersey cut 220,000 jobs during the recession, and added 115,000 since, so it's only a 51 percent recovery,” says Thorpe.

Thorpe says New Jersey faces several significant challenges, including the state's financial problems. The lack of money to fund basic infrastructure maintenance or tax incentives for business influences corporate decisions and makes some firms decide to leave the state, which lowers tax revenues, putting further pressure on the state's infrastructure and raising concerns among other companies thinking of locating in the state.

“You're bumping into this negative feedback loop, because you're getting less tax revenue from these businesses, which makes it even more difficult for the state to make investments, which means more companies are making the decision to leave,” he says.

The office sector is seeing some demand, and new development is keeping pace with absorption, Thorpe says. “Tenants want new space. New space is actually performing really well, the flight to quality is going on,” he says. “It's actually the older outdated buildings that are in trouble, and New Jersey has too many of those.”

Seventy percent of the office inventory in the state is 20 years old or older, he says. Office rents have hit bottom and are “gradually, very slowly inching up,” he says. In northern New Jersey, rents are up 0.3 percent vs. last year, and in central New Jersey, rents are up 1.4 percent vs. last year.

The pharma sector is not as important to New Jersey as many people think. “Pharmaceuticals only employ 66,300 people out of 3.9 million people that work in the state of New Jersey,” Thorpe says. “It's really kind of everything else that's driving the demand for commercial real estate in New Jersey.”

“I would argue that the window to sign the best deal as a tenant was 2013,” Thorpe says. “From a tenant perspective going forward, you're going to have less and less leverage. Vacancy is tight.”

The event, which drew about 75 commercial real estate market participants, most of them DTZ clients, was aimed at introducing the firm's new branding and approach.

DTZ has grown its New Jersey team from 18 brokers a year ago to 33 today, says Raymond P. Trevisan, managing principal, DTZ New Jersey, who hosted the meeting.

DTZ acquired Cassidy Turley earlier this year, and now says it operates with more than 28,000 employees across 265 offices in 50 countries, with $63 billion in transaction volume. The firm says it manages 3.3 billion square feet globally on behalf of institutional, government, corporate and private clients.

Also appearing on the program was former New York Yankee Graig Nettles, who mingled with the guests and reminisced about his legendary baseball career, surrounded by Yankee memorabilia from Hall of Fame catcher Yogi Berra.