Nicholas Nitti, left, and Mindy Lissner, of CBRE

SADDLE BROOK, NJ—Industrial property availability in New Jersey dropped to 7.8 percent, a six-year low, in the fourth quarter of 2015, while industrial market experienced a strong finish to 2015 as it continued the recovery toward pre-recessionary levels.

For the fourth consecutive quarter, New Jersey's industrial market surpassed the 5 million square feet quarterly leasing mark, with 7.02 million square feet of new lease commitments, according to CBRE research. This robust demand carried annual velocity to 24.28 million square feet—a 21.7 percent increase over 2014 levels and the second highest annual leasing figure in the past nine years.

“In New Jersey right now, we're experiencing the perfect storm,” Mindy Lissner, executive vice president, CBRE, tells GlobeSt.com exclusively. “Lease rates are up, vacancies are down, construction is up, cap rates are down, land prices are up. There are a lot more ups than downs, and the downs are good downs. It's definitely a dynamic market with a lot happening.”

Demand continued to concentrate in central New Jersey, accounting for 66.9 percent of the state's total leasing velocity, while activity in northern New Jersey remained stable. Class A product continues to drive occupier demand, accounting for 41 percent of the state's new lease commitments in the fourth quarter, especially notable given that Class A inventory accounts for only 9.6 percent of the state's total inventory.

“New Jersey is an ideal place for the e-commerce revolution for a number of reasons,” Lissner says. “You've got the largest and most affluent consumer base in the country, you can reach 100 million consumers within 24 hours, same-day, next-day delivery getting into New York City, the fact that we have the ports, the roadways, the labor. We've got surge labor, which is critical, the increased labor that's needed around holidays.”

Cumulatively, the Exit 8A, Carteret/Avenel, Route 287/Exit 10 and Hudson Waterfront submarkets captured 64.3 percent of velocity, with 1.25 million square feet, 1.19 million square feet, 1.14 million square feet and 927,000 square feet, respectively. The market recorded 22 new lease transactions greater than 100,000 square feet, of which 13 were greater than 200,000 square feet Notable transactions included:

Home Depot's 772,000-sq.-ft. renewal at Exit 8A
List Logistics 571,000-sq.-ft. long term commitment in Route 287/Exit 10
Serta's commitment to 460,000 square feet in Carteret/Avenel
National Retail Transportation's commitment to 439,000 square feet in the Waterfront.

There is increased interest and activity south of the Exit 8A submarket, Lissner says. H&M, American Hotel Registry, Subaru, and Amazon have all landed in the Exit 6 area of the Turnpike in Burlington County, she points out.

“Developers are continuing to look further south,” she says. “At Exit 8, where the town has not always been supportive of development, it's starting to change there. We're seeing increased demand from clients that are willing to go there, because lease rates are less, so although transportation might be a little higher, your costs will be lower.”

New Jersey's industrial market absorbed 888,000 square feet of available space during Q4 2015, curbing the state's availability rate to 7.8 percent—the first time in seven years that the state's availability rate dipped below 8 percent. Total absorption for the year amounted to 7.77 million square feet.

In Q4 2015, five projects totaling 691,949 square feet were delivered to the market and six new projects totaling two million square feet broke ground, bringing the total number of projects currently under construction to 19. With 2015 seeing the most construction starts in the past two decades, 2016 will set a record for new construction deliveries.

“Increased demand, aggressive New Jersey State Incentives and tightening supply continue to drive new construction asking prices higher each quarter in New Jersey,” says Nicholas Nitti, first vice president, CBRE. “With an average absorption time of five months after completion, demand for all warehouses will continue to be supported by New Jersey's aggressive industrial construction pipeline.”

Activity at the New York and New Jersey port terminals remains strong, with year-to-date loaded container traffic in TEUs up six percent over the same period last year. The Port Authority is continuing to upgrade infrastructure in preparation for the larger cargo vessels that will pass through the Panama Canal. New Jersey and the Port Authority are continuing their “Raise the Roadway” project, which will add an additional 64 feet of air draft to the Bayonne Bridge.

Home Depot's 772,000-sq.-ft. renewal at Exit 8A
List Logistics 571,000-sq.-ft. long term commitment in Route 287/Exit 10
Serta's commitment to 460,000 square feet in Carteret/Avenel
National Retail Transportation's commitment to 439,000 square feet in the Waterfront.

Instant Insights /

Industrial Availability Hits Six-Year Low, Leasing Robust, Says CBRE

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