The Northern and Central New Jersey industrial markets continued their positive movement in the third quarter of 2014 even as new space continues to come online and second generation space is returned to the market, according to new research from Colliers International.
The Port Authority of New York and New Jersey continues to upgrade various facilities on both sides of the Hudson River, bolstering the local industrial market in the short term, with likely longer-term benefits linked to the widening of the Panama Canal starting in 2015.
The third quarter registered 6.8 million square feet of industrial leasing activity, up 48.9 percent from 4.5 million square feet in the second quarter, and up 31.4 percent from 5.1 million square feet the year prior. Despite this strong activity, the overall availability rate for Northern and Central New Jersey remained at 12.2 percent for the second straight quarter, as nine new properties were delivered this quarter, adding more than 2.1 million square feet of vacant space to the market.
The average asking rent for Northern and Central New Jersey continued to rise, closing the third quarter at $6.30/sf, up from $6.19/sf in the second quarter and $5.95/sf from the prior year. Most notably, Central New Jersey matched its 2007 peak asking rent, of $6.16/sf, up from $5.93/sf in the second quarter and $5.53/sf the year prior. Meanwhile, average third quarter asking rents in Northern New Jersey were $6.43/sf, up just a tick from $6.41/sf and $6.33/sf in the second quarter and year-over-year, respectively.
Most of the activity was focused in Central New Jersey, driven by the large number of users seeking new class A facilities typically found in the Turnpike corridor market, while extensions and renewals drove activity in the northern part of the State. In the largest industrial transaction so far this year in Northern and Central New Jersey, Veeco renewed its lease at 6801 West Side Avenue in Secaucus, occupying the entire 667,882-square-foot building. Other notable third quarter industrial leases included Wakefern’s 419,500-sf renewal at 60 Tower Road in South Brunswick; Promotion in Motion’s 324,337-sf lease at 1 Heller Park Lane in Somerset; and Occidental Chemical’s 310,000-sf at 760 Jersey Avenue in New Brunswick.
Construction activity remained strong in the third quarter, with 13 properties underway totaling in excess of 4 million square feet, 3.3 million square feet of which is being built on spec, all in Central New Jersey. While this level of activity may raise concerns over vacancy in the coming quarters, two major space users have already signed leases in these under-construction properties: Dawn Foods leased 130,681 sf at 30 Knox Drive in Piscataway, and Amazon leased 391,650 sf at 275 Omar Avenue in Avenel.
The third quarter also saw an increase in second generation space hitting the market as users moved into new facilities. New third quarter availabilities include: 345,880 sf at the former Farmland Dairy site at 520 Main Avenue in Wallington; 167,032 sf at 20 Tower Road in South Brunswick after Preferred Freezer announced its 190,000-sf build-to-suit at 275 Blair Road in Woodbridge; and 124,933 sf at 1 Colony Road in Jersey City after Fergusen Supply announced that it will be moving into the newly redeveloped former Panasonic site in Secaucus.
Sales Market Sees Heavy Activity
The sales market had another robust quarter in Northern and Central New Jersey, with $247 million in total activity. In the largest industrial property this quarter, Pure Industrial Real Estate Trust purchased Scannell Properties’ FedEx Portfolio at 5 Commerce Drive in Barrington and 1 Commerce Center Drive in Dover for $67.8 million, or $184.16/sf.
This sales price tripled the $66.77/sf average asking price for industrial properties in Northern and Central New Jersey, up from $63.83/sf the year prior. Also, with land for industrial development being scarce, coupled with heavy investment activity in the Class A industrial market, many investors need to look to Class B product with the intention of rehabbing those properties.
“Demand for industrial space in Northern and Central New Jersey continues to be strong and on the rise, and will minimize any potential negative impact from the delivery of several new state-of-the-art facilities coming online,” said Robert R. Martie, Executive Vice President of the NJ Region for Colliers International. “Just as significant, the Port Authority of New York and New Jersey continues to upgrade its infrastructure at several facilities, in particular the Bayonne Bridge, in preparation for the larger cargo vessels that will pass through the Panama Canal starting in 2015. Container traffic at the local ports is up over last year and we have every reason to expect that to continue.”
Additional highlights from Colliers International’s 2014 Q3 New Jersey market analysis:
Northern New Jersey – Industrial
The overall industrial availability rate in Northern New Jersey was 11.5%, down from 11.9% in the second quarter, and from 11.6% year-over-year.
Central New Jersey – Industrial
The overall industrial availability rate in Central New Jersey was 12.9%, up from 12.5% in the second quarter, but down from 13.3% year-over-year.Related Articles: