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TEANECK, NJ-Due its diverse economic base and access to the Ports of Elizabeth and Newark, Northern New Jersey’s industrial market will recover faster than its counterpart in the central region when the economy rebounds. That, at least is the first-half prediction from a report by Colliers Houston & Co. The Central New Jersey industrial market is not so lucky.

David Houston, Jr., president of locally based Colliers Houston, says Northern New Jersey has historically been a stronger, more diverse marketplace. Central New Jersey is a regional distribution hub populated by larger buildings and is more dependent on–now slumping–retail sales and the local economy.

Houston adds that businesses locate to Northern New Jersey because “they have to be there to service the New York region.” Conversely, as a regional distribution center, Central New Jersey competes with Eastern Pennsylvania, the Lehigh Valley and Maryland. “So it has much more competition than does Northern New Jersey,” Houston tells GlobeSt.com.

Nevertheless, both regions have felt the effects of the economic downturn. In the 429.4-million-square-foot Northern New Jersey industrial market, asking rents have decreased slightly, ending the second quarter at $6.39 per square feet, mirroring the lease rates recorded in early 2006. Vacancy rates stood at an all-time high of 7.4%.

Top sale and lease transactions in the Northern New Jersey industrial market included: Continental Terminal Logistics’ 240,255-square-foot lease at 112 Port Jersey Blvd. in the Hudson Waterfront, which is owned by Rreef Real Estate; Monolith Group’s acquisition of a 156,300-square-foot facility, located at 360 S. Van Brunt Ave. in Central Bergen County, from US Foodservice; Star Snacks LLC signing on for 154,000 square feet at 108 Industrial Dr. in the Hudson Waterfront district, also owned by Rreef; and DeForest Investment’s sale of a 148,744-square-foot complex at 72 DeForest Ave. in Eastern Morris County, which was purchased by Commerce Park LLC.

Encompassing 283.7 million square feet of mostly large distribution facilities, Central New Jersey’s vacancy rate dropped to 9.8% in Q2, a significant rise from the 7.8% number charted in Q1 ’08. Average asking rents slid down to $4.97 per square foot after reaching a recent high of $5.42 in Q4 ’07. But as the report from Colliers Houston points out, “Effective rents have been cut even more drastically when incentives are factored in.” Due to its distribution-centric nature, Central New Jersey is heavily dependant on the health of the retail market, “making it extremely vulnerable to a sustained economic downturn and a dip in consumer spending,” Colliers Houston researchers note.

Notable sale and lease transactions in the Central New Jersey in Q2 were: BlackRock Realty’s acquisition of a 583,376-square-foot facility at 140 Docks Corner Rd. at Exit 8A, formerly owned by J.G. Petrucci and F. Greek; TA Associates’ purchase of a 277,949-square-foot facility in Somerset County from Invesco Real Estate; Korea Express’ 225,162-square-foot lease at 11 Commerce Dr. W. at Exit 8A, a Seagis Property Group holding; and Mystic Logistics’ 223,000-square-foot lease commitment at 147 West Manor Way at Exit 7A, which is owned by Allianz.

Houston says that the markets have hit bottom and are on the road to recovery. “When will it get back to a healthy market? It could take a good 12 to 18 months,” he says. “It all depends on retail sales.”

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