The northern and central New Jersey industrial markets are in the midst of a remarkable run with leasing activity of 5.4 million square feet, according to CBRE’s Q3 2021 New Jersey industrial figures.
The markets showed strong demand, with lower activity compared to past quarters reflecting the very sparse availability of industrial space, which reached a new low of 4.8% in the third quarter. In particular, the market was constrained by a lack of large block availabilities in quality buildings, as well as a reluctance by owners of properties under construction to strike deals in a market where rents significantly increase month to month.
Northern and Central New Jersey recorded nearly 5.4 million sq. ft. of leasing activity in Q3 2021, a quarter-over-quarter decrease of 34.5% and a year-over-year decrease of 26.2%. Pre-leasing accounted for 1.8 million sq. ft. of activity and leasing was dominated by consumer goods and third-party logistics companies. Year-to-date, leasing activity totaled over 22.4 million sq. ft., 37.5% ahead of the same period in 2020, which saw just 16.3 million sq. ft.
Average Class A asking rents in the combined Northern and Central New Jersey market climbed in Q3 2021, reaching $14.38 per sq. ft., a 6.9% increase quarter-over-quarter. The Class A average asking rent was up by a soaring 28.6% year-over-year, demonstrating the acceleration of competition in the New Jersey industrial market. Robust net absorption of 4.1 million sq. ft. included 1.6 million sq. ft. of new construction completions that were delivered fully pre-leased.
“This year’s strong first and second quarters are keeping the market on track for an exceptional year of leasing, though the lack of supply to meet demand may continue to constrain leasing as we round out the year,” said Thomas Monahan, vice chairman, CBRE. “The third quarter’s net absorption total resulted from a combination of strong leasing, the completion of 1.7 million sq. ft. of new developments that were fully preleased, and few large space additions.”
Seven buildings completed construction in Q3 2021, totaling 1.65 million sq. ft. with a cumulative pre-lease rate of 100%. The largest completion was 150 Old New Brunswick Rd in the Route 287/ Exit 10 submarket, a 622,230 sq. ft. Class A building preleased by Bob’s Discount Furniture. Six projects began construction during the quarter totaling 1.3 million sq. ft. One million sq. ft. of the total starts were in Central New Jersey, while only 300,000 of the starts were in Northern New Jersey, where developable land is scarce.
On the investment sales front, activity ticked up for the second straight quarter, increasing 9.7% quarter-over-quarter to $616.6 million. The average sales price per sq. ft. also increased quarter-over-quarter by 10.9% to $142 per sq. ft. The most valuable individual investment sale during Q3 2021 was the $91 million sale ($332 per sq. ft.) of 63 Stults Rd. in Dayton to CenterPoint Properties.
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