C&W Report: 743M-SF Industrial Market Still Solid

For openers, the 11-county region encompassing the northern and central parts of the state--a whopping market of 743 million sf that ranks behind only Los Angeles and Chicago in size--had a vacancy rate of only 6.5% at the beginning of this year. According to C&W's research unit, that's fully three points below the national average.

At the same time, the market had the second highest leasing volume in the country last year – nearly 23 million sf. The investment sales total of 12 million sf positioned the market in fourth place nationally.

And build-to-suits are indeed one of the drivers, according to C&W executive director Stan Danzig, who credits the drive toward operational efficiency with bringing logistics to the top of the corporate wish list.

"Logistics officers and distribution managers are receiving more attention than ever before," Danzig says. "In many cases, they now report directly to their CFOs or CEOs, resulting in more attention to distribution facilities and, in turn, custom build-to-suit product. New Jersey is experiencing tremendous activity in this area. This is most notable at Exits 8A and 7A of the New Jersey Turnpike, the state's industrial hotspots during the past few years."

Even so, last year saw two major spec projects in the Exit 8A market achieve lease-up, according to Danzig. For one, apparel wholesalers SanMar and LVMH took all of Keystone Property Trust's 475,000-sf 283 Prospect Plains Rd. in Cranbury, NJ. In the other, the USPS and Petco have divided up Matrix Development Group's 528,441-sf 24 Englehard Dr. in nearby Monroe, NJ.

"At the same time, the Exit 8A and 7A markets are running out of land fairly quickly," cautions Frank V. Caccavo, Jr., a C&W executive director. That, in his view, is shifting interest back north to markets like the Meadowlands and Jersey City.

"Keystone Property Trust is building two spec buildings totaling 525,000 sf in the Greenville Yards Industrial Park in Jersey City," Caccavo points out. "In the Meadowlands, Orix will break ground shortly on a 368,112-sf building in Carlstadt."

In terms of investment, "newer product in proven markets like 8A have attracted the most interest," says Andrew J. Merin, who heads C&W's Metropolitan Area Financial Services Group. "The properties that bring the highest bids are those with tenants in place, but partially leased and empty buildings are moving as well."

The most active buyers? REITs and pension funds, according to Merin, including names like First Industrial, AMB, JPMorgan, TA Realty Advisors, Clarion Partners, Teachers Insurance and Annuity and RREEF.