E-commerce, third-party logistics, and food and beverage companies are driving strong demand for New Jersey industrial real estate, according to Cushman & Wakefield. The East Rutherford-based commercial real estate services firm released its first quarter 2015 market research findings, reporting healthy leasing and rising rents in a market where tenants continue to absorb space deliveries to keep vacancy rates in check.
“As both online retail sales and manufacturing are expected to trend higher, the New Jersey industrial market is earning a position as one of the healthiest markets in the nation,” noted Ron Lo Russo, Cushman & Wakefield president, NY Tri-State region. “This is due in large part to the Port of NY/NJ and its proximity to the largest population concentration in the country.” Through February, the port had seen more than 680,000 loaded container TEU’s (twenty-foot equivalent units), a 7.1 percent increase over last year.
During the first quarter, New Jersey posted its strongest industrial leasing in the past year. The state saw 18 new leases in excess of 100,000 square feet. Highlights included Logistics Team’s 393,000-square-foot commitment at 3001 Woodbridge Ave. in Edison, Southern Wine & Spirits’ 282,400-square-foot commitment at 801 West Linden Road in Linden and Keystone Automotive Parts’ 251,430-square-foot commitment at 40 Western Road in Kearny. Additionally, 81 percent of renewal activity (totaling more than 1.8 million square feet) involved tenants occupying 100,000 square feet or more.
“Large deals remain the force behind industrial leasing velocity,” Lo Russo commented. “During the first quarter, we saw particular impact in the Meadowlands and Exit 8A submarkets, which each exceeded 1 million square feet of activity to start the year. Together, they accounted for 42.6 percent of total deal volume.”
As blocks of below-market-priced industrial space lease up, average rents are climbing in several submarkets, particularly Exit 7A, the Upper 287 Corridor and the Lower 287 Corridor. Statewide, average rents are up 7.2 percent year over year to $6.44 per square foot. The warehouse/distribution direct average rent has climbed $0.23 per square foot, to $5.68. As high quality space becomes increasingly scarce, rents can be expected to continue to rise, according to Cushman & Wakefield.
The first quarter’s healthy activity easily offset some significant space dispositions. Nine industrial blocks exceeding 100,000 square feet came online in recent months, including five within the Exit 8A submarket. Still, New Jersey recorded positive net absorption for the ninth consecutive quarter, with overall occupancy gains exceeding 2.1 million square feet for the seventh consecutive quarter.
“All five of New Jersey’s major industrial submarkets along the Turnpike saw positive absorption,” Lo Russo said. “The most impressive performance took place in the Lower 287 Corridor, where more than 730,000 square feet were absorbed. The state’s vacancy rate is holding steady, falling just slightly – from 8.1 percent to 8.0 percent over the past 12 months.” Meanwhile, the warehouse/distribution market saw a more dramatic improvement, with overall vacancy dropping 0.4 percentage points in the last quarter alone, to 7.6 percent.
New Jersey continues to record substantial new industrial development. Twelve construction projects totaling 2.5 million square feet are slated for delivery in 2015. Approximately 75 percent of this product is rising on a speculative basis.
“We anticipate continued healthy industrial demand in New Jersey through 2015; however, new inventory and the return of existing product to the market will likely offset leasing velocity to keep vacancy rates stable,” Lo Russo concluded. “Meanwhile, as quality space along the Turnpike remains somewhat scarce, we foresee further upward trending in asking rents, albeit possibly at a slower pace.”Related Articles: