New Jersey Industrial Market Tightens in Q3

(Save the date: RealShare Industrial 2012 comes to The Bankers Club, Miami, December 5 - 6.)

SADDLE BROOK. NJ –- The New Jersey industrial market’s vacancy rate is getting close to reaching below double digits thanks to another strong quarter with leasing volume totaling near 5.5 million sf, CBRE reports.

CBRE officials say that the overall vacancy rate statewide dropped slightly in the third quarter to 10.1%. The vacancy rate in Central New Jersey fell slightly from 10.4% three months ago to 10.3%, while vacancies in Northern New Jersey fell from 10.1% to 9.9% at the end of the third quarter 2012.

“With the market improving for Class A space, those tenants seeking such space are having a hard time finding the appropriate facilities,” said William Waxman, CBRE executive vice president. “There are only nine Class A properties with more than 200,000 sf available, mostly concentrated at exits 8A and 7A of the New Jersey Turnpike. There will be a lot of competition for these spaces in the coming months.”

James Tully, CBRE executive vice president, adds that the vacancy rate for Class A high-bay, large floorplate (big box) properties is below double digits. He adds that leasing velocity in New Jersey during 2011 and year-to-date 2012 have been at pre-recession levels.

CBRE in its Third Quarter 2012 New Jersey Industrial Marketview Report notes that short-term renewal commitments, which were the rage during the height of the recession, are decreasing in market share. Lease renewals only accounted for 15% of the total leasing volume in the third quarter as compared to 2009 and 2010, when they averaged approximately 33%.

“Many of the three and five-year blends-and-extends signed between 2008 and 2010 are set to expire,” Tully says. “The market should see a boost of activity due to this fact. This increase in demand will result in a tighter market with fewer opportunities as investors continue to view New Jersey as an attractive core market to expand their industrial portfolios.”

Asking rents in Central New Jersey went up slightly to $4.40 per sf, while rents fell .10 per sf to $6.01 per sf in Northern New Jersey as compared to three months ago.

Waxman and Tully believe that with the tight market availabilities and intense competition from tenants and investors, the New Jersey industrial sector will see an increase in new construction projects. Currently there are three projects totaling 1.16 million square feet being constructed on spec—two of which began this quarter. Several build-to-suit developments are also underway.

The projects being built on spec include: a 232,000-sf development in Carteret by The Hampshire Companies; a 350,000-sf project in Newark by The Morris Companies and J.G. Petrucci Company’s 571,000-sf project in Edison, NJ.