NAI James E. Hanson released its 3Q 2018 Northern and Central New Jersey Industrial Market Report detailing leasing and sales data for key industrial submarkets. The report showcases sustained record-high prices in Bergen, Essex and Hudson markets driving continued growth of industrial markets to the west, north and south.
With sustained demand from distribution and fulfillment users searching for the space in an increasingly tightening market, northern and central New Jersey’s industrial market has continued to see steady growth in average asking rates with leasing at $7.99 psf this quarter, up $0.54 psf since Q3 2017 and up $0.23 psf since last quarter. On the sales side, continued demand from investors has led sale prices to hit triple digits at $116.74 psf, up almost 30% from Q3 2017 and over 15% from Q2 2018.
On the submarket level, 13 of the 14 submarkets in the region detailed in the report are currently below a 5% vacancy rate and five out of 14 currently sit below a 2% vacancy rate. Leading the way for the second straight quarter is the Exit 8A submarket with a 0.2% vacancy rate, down 90 basis points from Q2 2018’s record low of 1.1%. The Central Bergen submarket, comprising of the Hackensack and Englewood areas, continues to lead the way in pricing at $10.55 psf, up $2.01 psf from Q3 2017 and $0.30 psf from Q2 2018.
“It is obvious from the data that the northern and central New Jersey industrial market is well-positioned for continued strength throughout 2018 and into 2019,” said Kristen Jost, research director for NAI James E. Hanson. “A lack of development opportunities and elevated construction costs paired with heavy demand throughout the region will mean that the pricing increases and vacancy rate decreases we have seen across the region for many consecutive quarters will continue well into the foreseeable future.”
Despite continued international trade uncertainty and geopolitical developments, the Ports submarket continues to show excellent resiliency in 3Q 2018. At 138,756,733 square feet of rentable building area, the Ports submarket is the largest in the region and one of the most mature. However, the high number of older Class B, C, & D spaces in the submarket complicates the supply situation and sustained high demand has placed significant stress on the limited Class A supply helping to push vacancy rates lower over the past several quarters. This trend is highlighted by a decrease in the market’s vacancy rate by 40 basis points since last quarter down to 3.9% and a $0.46 psf increase in asking rates from the previous quarter up to $8.08 psf.
“Although uncertainty continues to define the international trade conversation well into 2018, we have not seen a corresponding decline in the demand for industrial space in the Ports submarket,” said Russell Verducci, vice president at NAI Hanson. “We know that companies do not look forward to uncertainty in this area of business as it deeply impacts their bottom lines, but the overall fundamentals of the international shipping system remain strong and have contributed to a robust market in the Ports area that shows no signs of abating.”
With record-breaking pricing and low vacancy rates in traditional industrial markets like the Ports, the emergence of industrial markets to the west and north has continued into 3Q 2018. The 2,177,554 square feet of industrial space under construction in the Warren and Sussex submarket speaks to an increase in investor and tenant interest in the state’s most northern and western market. Although this submarket had one of the highest vacancy rates in Q3 2017 at 9.1%, the market has seen a precipitous decline with a vacancy rate currently standing at 4.3%. In correlation with the rapid decline in vacancies, the market has also seen an increase in pricing up to $5.26 psf, an increase of $0.14 psf from Q3 2017.
“The emergence of secondary industrial markets like Warren and Sussex speaks directly to industrial users’ continual search for space that is both highly accessible and well-priced as well as investors’ search for large-scale industrial development opportunities,” added John J. Schilp, senior vice president at NAI Hanson. “With an abundance of land and several significant east-west transportation arteries, this submarket provides both of the key ingredients needed for the successful large-scale industrial construction we are now seeing come to the market.”
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