The Northern and Central New Jersey industrial markets recorded positive net absorption of 723,000 square feet during Q4 2021, further reducing the market’s already low availability rate, which fell 90 basis points (bps) year-over-year to 4.8%. Availability for Class A industrial space was even lower at 2.0%. The lack of available space has been the impetus for lower leasing activity in 2021 when compared to 2020.
During Q4, leasing activity, which excludes renewals, was 3.0 million sq. ft., bringing the annual total to 25.5 million square feet, a figure just shy of the record set in 2019. The lack of available space was the main factor of the slight decline in new lease signings. In contrast, renewals topped 3.27 million square feet, a 33% increase above the five-year quarterly average.
“New Jersey’s industrial market continues to surpass all expectations with insatiable demand, strong leasing and record-breaking rents quarter after quarter,” said Thomas Monahan, a CBRE vice chairman.
Overall average asking rents for Class A industrial space ended the quarter at $17.06 per square foot, up 19% from the previous quarter and 55% year-over-year. According to CBRE’s report, the skyrocketing rents are due to tight market conditions and no influx of available space hitting the market.
Industrial leasing activity was dominated by wholesale/retail companies, which accounted for 48% of all space commitments for deals below 50,000 square feet, while third-party logistics firms accounted for 26% of all transactions in the market. Among the largest leases completed in Q4 was a one million square foot renewal by Petco at 257 Prospect Plains Road in Cranbury.
Eight new industrial facilities were completed in New Jersey during the fourth quarter, totaling 2.17 million sq. ft., with a pre-lease rate of 47%. During Q4, 13.27 million square feet of industrial space was under construction, virtually unchanged from the previous quarter.
On the investment sales front, activity surged to $1.59 billion to end the year at a new record. At $3.04 billion, 2021 sales volume surpassed the five-year average by 20%. The largest transaction of the quarter was Square Mile Capital’s $157 million sale of 703 Bartley Chester Rd. in Flanders to Saadia Group.
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