"Sale prices and lease rents remain disconnected in North Jersey, as low interest rates and a lack of product for sale have driven sale prices to record heights that can't be justified by capitalizing net operating income," Houston continues. "Recent sale prices in North Jersey approaching and, in some cases even exceeding $100 per sf are just an indication of the imbalance between supply and demand."
Because of that, "product shortages may begin to occur during the second half of the year," Houston suggests. "Even in late spring, users were finding it difficult to find available space in units of more than 100,000 sf in Morris County near Parsippany."
That's one thing that separates the northern industrial market from its Central New Jersey counterpart, in Houston's view. To begin with, the latter region has substantially more buildable land, giving developers greater leeway to do some speculative development. The combination of spec construction, especially around NJ Turnpike Exit 8A, along with build-to-suit activity further south at Exit 7, has kept both rents and sale prices at approximately 2000 levels, according to Houston.
"Fortunately, with new construction winding down and little new inventory expected to enter the market for the rest of the year," Houston concludes, "rental rates and sale prices have firmed and should improve in the second half of the year. In Central New Jersey, however, there are ample choices for most users seeking space.
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