EAST RUTHERFORD, NJ—Jones Lang LaSalle says industrial vacancy rates in New Jersey declined to 7.2 percent in the second quarter, mainly because of substantial leasing activity.

JLL says the market's vacancy rate is expected to decrease noticeably during the next six months as leases involving large blocks of space take effect and new speculative deliveries remain limited.

“Institutional demand continues to be the biggest driver of sales activity, as investors increasingly turn to industrial real estate for stable yield,” says David Knee, senior managing director at JLL. “As a result of increased institutional demand, average class A cap rates have continued to compress and now trade between 5.25 percent to 5.0 percent on average.”

Following a record-breaking year for class A speculative development, Central and Northern New Jersey witnessed a spike in leasing activity for class A warehouse/distribution space during the past six months. Year-to-date, the market has posted 10.8 million square feet in deal volume, with 5.6 million square feet of that amount recorded this quarter. The Northern and Central New Jersey average asking rental rate rose 1.1 percent from midyear 2014 to $5.66 per square foot one year later.

New Jersey's industrial market posted total positive net absorption of 2.4 million square feet in the first six months of the year, outpacing the first two quarters of 2014, when the state saw 2.05 million square feet of positive net absorption. Northern New Jersey continued to benefit from the majority of the state's net absorption and leasing activity. This quarter marked the ninth consecutive quarter of positive net absorption in Northern and Central New Jersey.

Transactions in the Exit 12 submarket totaled 1.4 million square feet in the second quarter, with Amazon.com Inc.'s 1.0 million-square-foot lease at 8003 Industrial Avenue in Carteret accounting for the majority of that total. This deal was the largest lease signed in New Jersey in nearly two years. Several other large transactions helped stabilize the Exit 12 submarket, including Panalpina World Transport Ltd. taking 166,000 square feet and MXD Group signing for 177,000 square feet at Prologis' Port Reading Business Park in Woodbridge. In addition, Shipco Transport renewed its 282,000-square-foot lease at 699 Kapkowski Road in Elizabeth, located in the Port submarket.

Investment sale activity remained strong in the second quarter of 2015, aided by Prologis' acquisition of KTR Capital Partners.