SADDLE BROOK, NJ—Driven by the insatiable appetite from e-commerce companies for quality warehouse space, New Jersey's industrial market continued its robust pace in the third quarter, exemplified by both record high average asking rents and the best level of quarterly absorption, according to CBRE's Q3 2018 industrial market report.

“Due to favorable economic conditions and record-breaking activity at the Port of New York and New Jersey, the New Jersey industrial market continues to favor owners and developers of warehouse and distribution facilities,” said Thomas Monahan, vice chairman, CBRE. “The market's continued strength was exemplified by both record high average asking rents and the best level of quarterly absorption. Moreover, given the recent market dynamics, rent pricing is rising very rapidly, especially among the most sought-after prime properties. We certainly expect this to continue well into 2019.”

Leasing velocity totaled more than 6.8 million square feet. Total velocity was up nearly 14.6 percent quarter-over-quarter, pushing the market to an increase of 6.3 percent on a year-over-year basis. At the same time, the third quarter total was 11.8 percent higher than the five-year quarterly average.

During the third quarter, net absorption for the New Jersey industrial market was 6.4 million square feet, which CBRE says is the highest recorded level since it began tracking the market in 2001.

As a result, net absorption for the year reached nearly 7.5 million square feet, 4.8 million square feet more than the same period last year. The Exit 8A submarket posted the highest net absorption at 3.5 million square feet, while the Rt. 287/Exit 10 submarket also cracked the million-square-foot barrier at 1.1 million square feet, which helped propel Central New Jersey to a grand total of nearly 5.3 million square feet for the quarter. This was “an astounding turnaround” for a submarket that had negative net absorption the previous quarter, says CBRE's report.

This strong demand for space helped average asking rents to once again hit an all-time high of $7.09-per-square-foot, $0.09 greater than the second quarter's $7.00-per-square-foot, an increase of $0.08-per-square-foot quarter-over-quarter and $0.48-per-square-foot year-over-year. This current rate was $1.07-per-square-foot above the five-year average for the market.

Northern New Jersey recorded a higher average rate at $7.84 per square feet, compared to Central New Jersey at $6.28-per square feet. The Northern New Jersey rate reflects an increase of $0.83-per square feet over the second quarter, a growth rate of nearly 12 percent.

Despite a total of 7.7 million square feet market-wide either completed during the third quarter or still under construction (the majority of which is pre-committed), the continually rising rents show that the market is not yet close to equilibrium. However, CBRE expects that many projects in the pipeline will ultimately come to fruition to meet the growing demand from third-party logistics operators, e-commerce companies, food and beverage distributors and others.

On the investment sales front, the 43 sales recorded during the third quarter was a significant increase from the 24 transactions that closed during the second quarter. The total size of the 43 properties was just over six million square feet, more than 62 percent of which were in Northern New Jersey. While down from the $97-per-square-foot average sale price, the $83.96 per square feet recorded during the third quarter was roughly on par with the first quarter of 2018.

Instant Insights /

CBRE: NJ Industrial Rents Set Record Highs in Q3

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