Stephen P. Jenco is client services manager for Grubb & Ellis in Fairfield, NJ.After posting less than 1 million square feet of positive net absorption during 2007 in the wake of additional availabilities and speculative construction completions, the first three months of a new year produced a resurgence in leasing velocity within the Northern and Central New Jersey industrial market. An uptick in demand for big-box warehouse space translated into two million square feet being absorbed in the Northern and Central New Jersey industrial market during the first quarter. This represented the largest volume of positive absorption recorded during a single quarter since the third quarter of 2006 and more than doubled the total amount of positive absorption that occurred in all of 2007.

Approximately 13 out of the 24 Northern and Central New Jersey industrial submarkets reported positive absorption during the first quarter, which was in contrast to the previous quarter, when 13 submarkets posted negative absorption figures. Just over 59.2 million square feet was available in the industrial market during the first quarter compared to nearly 60.4 million square feet available at year-end 2007. The Northern and Central New Jersey overall industrial availability rate slipped from 9.4 percent at the end of 2007 to 9.2 percent in the first quarter. This decline ended a streak of three consecutive quarters of a rising industrial availability rate spanning from mid 2007 to year-end.

The redevelopment of former industrial sites is expected to continue, especially in Northern New Jersey, as developers pursue opportunities where large tracts of available land are in short supply. Such ventures not only result in the elimination of a local eyesore, but also benefit the local community in the form of higher tax ratables generated by the redeveloped project.

In early 2008, Indianapolis-based Duke Realty purchased the 102-acre former General Motors assembly plant in Linden. The sprawling 2.9 million-square-foot industrial complex was closed by General Motors as a cost saving measure in 2005. Duke Realty plans on demolishing the existing buildings and addressing environmental remediation issues prior to redeveloping the site as a mixed-use project. In Jersey City, AMB Property Corporation recently acquired a 50-acre parcel along Routes 1 and 9, which had formerly been part of a landfill. AMB plans on developing an 878,000-square-foot warehouse to be called AMB Pulaski Distribution Center on the site.

Looking ahead, an impending economic downturn could produce significant headwinds that threaten to blow the industrial market off course and once again boost availability rates, as companies restructure their real estate holdings. According to the Federal Reserve, industrial output dropped by 0.5 percent in February, which was the biggest decline in four months. Consumer confidence has declined to its lowest level in five years amid mounting concerns about the housing downturn, skyrocketing energy prices, the weakening job market and slower business activity. Furthermore, the U.S. Gross Domestic Product (GDP), which is widely considered the best overall gauge of economic health, increased a miniscule 0.6 percent in the fourth quarter compared to a robust 4.9 percent in the third quarter. Many economists are anticipating even weaker growth during the first quarter.

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