Real Estate

New Jersey Industrial Market Experiences Record-Setting Year in 2016

With 10.6 million square feet of positive net absorption – the highest total for any year since 1998 – and a record-setting year-over-year increase in average asking rents, New Jersey’s industrial market experienced one of the most active years in its history in 2016, according to Parsippany-based Transwestern’s Fourth-Quarter 2016 Industrial Market Report.

Average asking rents peaked for the fourth consecutive quarter at $6.73 per square foot and increased in 24 of the 25 industrial submarkets when compared year-over-year. Meanwhile, the state experienced its 15th consecutive quarter of positive net absorption – its longest stretch ever. Additionally, the overall vacancy rate declined to 5.5 percent, which is the lowest it’s been since the fourth quarter of 2000.

“Industrial tenants are flocking to New Jersey as a shift in trade volume to the East Coast is increasing the demand for an already constrained supply,” said Transwestern Managing Director Alex Previdi. “Double-digit rents are becoming more common in New Jersey, allowing landlords to continue to recover losses from the most recent recession.”

While e-commerce companies such as Amazon, which inked New Jersey’s largest fourth-quarter deal, remain the primary drivers of leasing activity, new construction is at its highest level since 2000 and is expanding into secondary markets that typically cater to smaller distribution centers and manufacturing and storage facilities.

“Activity is especially pronounced in central New Jersey, which accounted for 60 percent of the annual absorption and the market’s top five fourth-quarter leases,” said Transwestern’s New Jersey Research Director Matthew Dolly. “Also, while it’s not discussed nearly as much as the Turnpike corridor, New Jersey’s Interstate 287 corridor has proven to be critical to the health of the state’s industrial market.”

Home furnishing companies were particularly active at the end of 2016, with the following deals executed during fourth quarter:

  • Modway Furniture preleased a 635,000-square-foot warehouse at Turnpike Exit 8 in East Windsor that is expected to be delivered during fourth quarter 2017.
  • Crest Home Furnishings leased the former home of USA Detergents, a 360,000-square-foot building just off U.S. Route 1 in North Brunswick.
  • Bob’s Discount Furniture leased a 360,000-square-foot building off Turnpike Exit 12 in Carteret.

With New Jersey set to benefit from an expected shift in manufacturing back to the United States, there remains a need for infrastructure investment. In line with President Donald Trump’s push to improve infrastructure nationally, New Jersey is making substantial investments in its roads, bridges and port. With $400 million per year earmarked for improvements following the recent replenishment of the state’s Transportation Trust Fund, the New Jersey Department of Transportation is currently working to identify ways to speed up infrastructure projects.

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