Investor Demand for All Things Industrial in New Jersey Remains Strong

On Feb 13, 2018

Robust investor demand for industrial product in New Jersey over the past year is poised to continue through 2018, according to Cushman & Wakefield’s East Rutherford-based investment sales group. During 2017, the 16-member team orchestrated $1.1 billion in industrial transactions, entering 2018 with $927 million of additional sales under contract, including 6 million square feet of new development.

“Strong investor interest in new construction, vacant-forward sales, and institutional buying off of I-95 speaks to the depth of demand for all things industrial in New Jersey,” said Gary Gabriel, Executive Managing Director, Cushman & Wakefield. Gabriel and Kyle Schmidt, a director, lead the East Rutherford-based investment sales group’s industrial practice, and are members of the firm’s national Industrial Advisory Group.

In 2017, there were 19 industrial sales greater than 100,000 square feet in Northern and Central New Jersey with an aggregate value of $955 million. Of the total, there were only four Class A sales, which traded at $159 per square foot, nearly $50 per square foot more than the overall average.

The Cushman & Wakefield team maintained a dominant market share, including the state’s largest single-asset industrial transaction;  the sale of Cranbury Station Park in Cranbury Station from the Rockefeller Group and Alfieri to Clarion Partners for more than $150 million. The recently-completed, 1.24 million-square-foot, 40-foot clear distribution facility sits on 120 acres in the Turnpike Exit 8A submarket and is 100% leased to Wayfair, an e-commerce retailer. “The Exit 8A market had been starved of core industrial opportunities of scale,” noted Schmidt. “As a result, investor interest for an acquisition of this quality and profile was particularly competitive.”

One-day dock-to-doorstep access to over 100 million customers has driven 8A rents and occupancy rates to unprecedented levels, according to Schmidt. Exit 8A remains one of the state’s tightest industrial submarkets, with a vacancy rate of under 2 percent.

“These historic fundamentals are having a profound impact on the investment sales market,” Schmidt said. “As a result, the price per square foot ceiling for industrial product at 8A, has been shattered versus prior cycles.”

The 287 Corridor is also commanding interest from the investor class and tenants, according to Schmidt. A prime example involves Cushman & Wakefield’s sale of Lincoln Industrial Park in Piscataway from a partnership of Lincoln Equities Group LLC and Real Capital Solutions to the Rockefeller Group Development Corp. The $57 million, 228-acre land sale included development rights for over 2 million square feet of new construction.

Year-over-year, the 287 Corridor has seen a marked decrease in available space, with the vacancy rate decreasing from 6.1 percent to 2.1 percent. The 287 Corridor is coming into its own this cycle, and for good reason, as it offers great access to labor and some relief from tolls.  In addition to Rockefeller, other institutional investors are making investments in the market – including Clarion Partners, Industrial Property Trust, LaSalle Investment Management and PCCP.

New Jersey industrial demand in 2017 has expanded beyond the I-95 and 287 Corridors. Cushman & Wakefield’s $95 million sale of Wharton Commerce Center illustrates this trend. The East Rutherford-based team sold this 1.5 million-square-foot, two-building complex which was primarily long-term leased to a contract beverage manufacturer. “The ability to move a project west of 287 for nearly $100 million is a clear indicator of the depth of interest for industrial investment,” said Gabriel.

The team’s vacant-forward sale of 215 Blair Road in Avenel is another demonstration of investor demand. Barings purchased the 372,848-square-foot property, which included an existing building and a “to-be-built” component – without leasing commitments – from Sitex for $65 million.

The New Jersey industrial market currently reports an overall market vacancy rate of 3.8 percent (a 70 basis point decrease year-over-year) and an overall weighted average asking rent of $8.15 per square foot (a 16 percent year-over-year increase), according to Cushman & Wakefield. “We expect the combination of solid fundamentals and a continued surge of industrial-oriented capital to produce another above-average year of sales volume in 2018,” Schmidt noted.

Cushman & Wakefield is currently marketing a wide array of industrial opportunities, from value-add to core, single tenant properties. The team has completed $27 billion of office, industrial, retail, multifamily and land sales throughout New Jersey, New York, and Fairfield County, Connecticut since 2000.

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