SADDLE BROOK, NJ—The industrial real estate market in New Jersey continues to see strong demand, higher rents and low availabilities.
Commercial brokerage firm CBRE in its latest market report on the industrial sector in the Garden State, states that the market continues to see a rise in rents, with transactions approaching $13.00-per-square-foot in Northern New Jersey and $10.50-per-square-foot in Central New Jersey, well above average asking rates.
The second quarter saw average asking lease rates hit record highs, reaching $7.39-per-square-foot. This was an approximately 2% increase above the first quarter and marked the fifth quarter in the last six in which the rate indicated quarter- over-quarter growth, CBRE reports.
The report also noted that in the Northern New Jersey portion of the market, the average asking lease rate broke the $8.00 per-square-foot barrier for the first time, increasing $0.10 per-square-foot over the prior quarter to an average of $8.01 per-square-foot. Central New Jersey also bested its previous high, jumping $0.24-per-square-foot to $6.66 per-square-foot.
CBRE notes that those asking rates are misleading since the majority of newer product is offered without a published asking rent. With that in mind, CBRE believes the spread between average asking rents and actual taking rents will continue to expand.
The overall market experienced a 20-basis-points drop quarter-over-quarter in its availability rate to 6.2%—the lowest rate seen in the New Jersey industrial market since the first quarter of 2005.
Leasing activity of 6.7 million square feet, while robust and the highest ever recorded for a second quarter since CBRE began tracking the New Jersey industrial market in 2001, was slightly lower than the 6.9 million square feet posted in the first quarter of 2019. Net absorption was also lower than the first quarter at 3.6 million square feet, which was more than 900,000 square feet than three months earlier. However, the second quarter total marked the 10th consecutive quarter with a positive result.
Of the total second quarter leasing activity, more than 4.5 million square feet—or two-third of all deals— took place in Central New Jersey. Nine of the 10 largest leases for the quarter occurred in the Central New Jersey portion of the market, all of them in the Exit 8A submarket. The heavy demand at Exit 8A has effectively left little to no existing quality space available, and the resulting shortage has led some occupiers to bank space as a hedge against future needs, the report states.
The second quarter ended with seven buildings added to inventory, bringing 2.1 million square feet of new industrial space to the market. Another sign of strength was that 45% of the new product was pre-leased upon delivery.
“As market fundamentals remain incredibly strong, although fluctuating, New Jersey’s industrial market continued to break records with higher asking rents and very low availabilities for quality product,” says Mindy Lissner, EVP, CBRE. “Given New Jersey’s central location, at the epicenter of the Northeast distribution corridor, and strong demand by e-commerce and logistics users, the market is poised to remain robust for the foreseeable future.”
During the second quarter, third party logistics companies had a dominant 41% share of new leases in the market. Major leases included a 611,320-square-foot renewal by Geodis Logistics at 1 Costco Way in Monroe Township; a 382,596-square-foot new lease by Corbion at 700 Union Boulevard in Totowa and a 333,059-square-foot renewal by Menlo Logistics at 24 Englehard Drive in Monroe Township.