Squeezed by a persistent scarcity of space, the New Jersey industrial sector continues to demonstrate an unremitting capacity for growth, according to Transwestern’s Second-Quarter 2018 Industrial Market Report.
With the quarter’s average asking rent of $7.80 per square foot – a level standing 7.4 percent higher on a year-over-year basis – industrial rents have now set record highs for 10 consecutive quarters. New Jersey rent levels are 27 percent higher today than when they first eclipsed their all-time high in the first quarter of 2016, and they exceed their post-recessionary low by an impressive 52 percent.
“With limited availability of space, the Garden State’s industrial market is not only setting records in asking rents, it’s also establishing new highs in net absorption levels,” said Alex Previdi, managing director at Transwestern. “Even amid this unmistakable, market-wide paucity of space, we’re also seeing a growing number of redevelopment projects that are either breathing new life into older industrial properties, or are repurposing office and other space for industrial use.”
Rent escalation occurred over a broad geographical tableau, with increases seen in 14 of 25 submarkets by quarter’s end. Levels were higher on a year-over-year basis in 21 submarkets, and they increased by more than 10 percent on a year-over-year basis in 11 submarkets. Asking rents exceeded $9.00 per square foot in three submarkets and stood higher than $8.00 per square foot in five other submarkets.
The Transwestern report projected that asking rents should continue to increase in core markets and found that asking rents had peaked in seven submarkets this past quarter: Bergen Central, Exit 12/Carteret-Avenel, Exit 13/Linden, Exit 14/Newark East, Fairfield, Morris West, and Route 280/Suburban Essex.
The market’s capacity for historic breakthroughs extended to a new 15-year high in net absorption. New Jersey’s industrial sector absorbed 14.7 million square feet over the past 12 months, obliterating a previous record of 13.3 million square feet set in the 12 months ending in the third quarter of 2003.
The sector saw 4.8 million square feet of industrial space absorbed during the second quarter, which ranks as the third-highest level ever. Moreover, the market has experienced positive net absorption every quarter since the first quarter of 2013, which represents a total of 48.5 million square feet absorbed over the course of that 21-quarter period.
Transwestern pinpointed the Route 287 West submarket as the quarter’s top-ranking territory in terms of absorption, where, remarkably, a 1.7 million-square-foot level of net absorption was nearly twice the area’s previous all-time high set in the first quarter of 2006. The Exit 8A submarket’s net absorption of 3.7 million square feet represented the highest total on a year-over-year basis. Other submarkets with rapidly increasing occupancy levels included Meadowlands, Exit 7A/Trenton/I-295, and Exit 11/Perth Amboy/GSP.
The report documents continuing low levels of availability, despite a noteworthy pipeline of new development. The market’s vacancy level of 3.9 percent set a record for the fourth quarter in a row. Eight submarkets reported vacancy rates below 3.0 percent. Yet some 5.7 million square feet of new development has been added thus far in 2018. A total of 10.7 million square feet has entered the market over the past 12 months, and an additional 7.3 million square feet is under construction.
“New Jersey’s industrial sector is firing on all cylinders, not only as it pertains to record levels of demand, vacancy and asking rents, but also across the entire terrain for warehouses, distribution centers and manufacturing buildings alike,” said Transwestern’s New Jersey Research Director Matthew Dolly. “Continued challenges include assessing transportation costs and labor shortages for tenants, while for developers, convincing municipalities that industrial development is perhaps the best investment for their communities.”
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