Colliers Q4 Report: Northern/Central NJ Industrial Market has Record-Setting 2015

On Jan 26, 2016

The Northern and Central New Jersey industrial market ended 2015 having registered its highest annual leasing and absorption totals and largest year-over-year availability rate improvement on record, according to research from Colliers International. Strong fundamentals and overall demand for space suggest that 2016 will also be robust, although reaching similar highs will be a challenge given the historically peak levels achieved in 2015.

In line with the industrial market’s consistent recovery, the fourth quarter represented another strong period of growth. At 12 million sf, leasing activity was up 26 percent from the third quarter, and at 43.8 million sf, full-year leasing activity was up over 46 percent from 2014. The overall availability rate dropped by 80 basis points (bps) from the prior quarter, to 9.8 percent, the market’s lowest level since the third quarter of 2006. Robust demand coupled with a dearth of new space also boosted the quarter’s net absorption to 6.1 million sf, up from 5.7 million sf in the third quarter.

Demand for modern Class A warehouse space by occupiers continued to spur new construction, as five new projects totaling 1.5 million sf broke ground during the last quarter. Companies continued to demonstrate interest for spec construction, evidenced this quarter by Fedway’s 539,170-sf lease at 10 North Avenue in Elizabeth and All-Ways Pacific’s 285,362-sf lease at 2 Industrial Road in Dayton. Four of the five largest transactions signed in the fourth quarter were new leases.

“The Northern and Central New Jersey industrial markets were extremely active in 2015,” said David A. Simon, SIOR, Executive Managing Director and Market Leader for the New Jersey operations of Colliers International. “Market fundamentals remain strong and based on the current level of activity in the market, including a number of large requirements, we expect another dynamic year in 2016. As a result, we anticipate seeing rental rates increase while availability diminishes.”

NORTHERN NEW JERSEY

Fourth quarter leasing activity in Northern New Jersey totaled 6 million sf, up 57 percent from the third quarter. The availability rate fell to 9.9 percent, which marks the first time the availability rate dipped below 10 percent since 2008. The Port Market drove activity this quarter, accounting for 55 percent of leasing activity. As distributors are increasingly focused on the last mile, the Port Market has seen continued growth due to its close proximity to major urban centers and the Ports.

The average asking rent for warehouse space in Northern New Jersey increased for the 11^th consecutive quarter, closing the fourth quarter at $6.25/sf, up 3.6 percent from the prior year. With the availability rate dropping below 10 percent, tightness in the Northern New Jersey market will continue to support rental growth.

CENTRAL NEW JERSEY

At 3.2 million sf, Central New Jersey recorded its 12th consecutive quarter of positive net absorption. For the quarter, nine of the eleven submarkets that make up the Central New Jersey market recorded positive net absorption. As a result, the availability rate saw a 110-bps improvement, ending the year at 9.6 percent — the lowest rate recorded since the first quarter of 2006. Strong activity in Central New Jersey, specifically along the New Jersey Turnpike continued, as Home Depot renewed 812,739 sf at Exit 8A and List Logistics signed a new 571,000-sf lease at Exit 10.

Increased activity coupled with limited available space continues to support growth in asking rents. At $5.09/sf, the average asking rent for warehouse space is up 2 percent from the prior year.

“New Jersey’s industrial market had a banner year in 2015, reaching historic levels for both net absorption and leasing activity,” said John Obeid, Senior Director, Research, of the Colliers New Jersey operations. “The overall availability rate dropped below 10 percent for the first time since the third quarter of 2006, and the 230 bps availability rate decrease between 2015 and 2014 was the largest year-over-year improvement on record. All signs point to another excellent year ahead.”

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