At the half-way point of 2018, the Northern and Central New Jersey industrial market remains on an established positive trajectory despite a scarcity of existing, modern warehouse space. Cushman & Wakefield Research today reported strong second-quarter absorption, vacancy at a historic low and asking rents that have reached new heights.
Transactions in the 100,000 to 300,000 per-square-foot range fueled demand over the past three months, accounting for nearly one-third of the approximately 5.5 million square feet leased. These deals pushed year-to-date leasing to 11.9 million square feet, nominally behind last year’s mid-year total. The three largest commitments of the quarter included Clutter.com’s 449,890-square-foot commitment at 1065 Cranbury South River Road in South Brunswick, One Stop Logistics’ 369,294-square-foot lease at 83 Stults Road in South Brunswick and clothing manufacturer FREEZE’s sale/leaseback of its 318,389-square-foot facility at 473 Ridge Road in Dayton.
“In sum, tenants absorbed 3.7 million square feet of industrial space in New Jersey during the second quarter, bringing year-to-date net occupancy gains to 7.5 million square feet,” noted Cushman & Wakefield’s Andrew Judd, New Jersey market leader. “This trails only the 2016 mid-year record aggregate in terms of recent historical absorption.” Year over year, the state’s industrial vacancy rate has dropped 120 basis points, to a historically low 3.3 percent; this includes a 30 basis-point drop over the past three months alone.
“Space options have become limited for larger warehouse tenants,” added Jason Price, director of Cushman & Wakefield’s tri-state suburbs research. “Yet while this has dampened new leasing somewhat, renewal activity surged to 3.4 million square feet during the second quarter. In fact, 15 tenants renewed leases larger than 100,000 square feet – marking a 61.9 percent quarter-over-quarter increase.”
As most core submarkets further tightened or remained tight, New Jersey industrial asking rents pushed higher by 2.8 percent during the second quarter, to $8.44 per square foot – yet another historic high. Within warehouse/distribution product, the average rental rate now exceeds $8.00 per square foot for the first time on record. Meanwhile, asking rents for Class A warehouse space are priced at almost a 10.0 percent premium over the state’s market average.
Nearly 5.5 million square feet of new industrial product has been built so far in 2018, of which 79.2 percent has been leased. Significant second-quarter construction deliveries included Wayfair’s 1.3 million-square-foot facility in Cranbury and Best Buy’s 725,400-square-foot warehouse in Piscataway. Currently, 6.5 million square feet is under development, of which 45.4 percent has been committed to by tenants.
“The majority of the sites under construction in New Jersey are slated to deliver in the second half of 2018, which should push the annual completions total to a new historic high,” Price noted. “The Upper 287 Corridor, Port Region and Exit 8A are all expected to see new developments break ground in the immediate future, as the need for Class A warehouse space continues unabated.”
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