Despite experiencing a near-record amount of new development in 2018, New Jersey’s industrial market suffers from a severe shortage of new product, resulting in skyrocketing asking rents. According to the First-Quarter 2019 Industrial Market Report from Transwestern Commercial Services (TCS), the nearly 6 million square feet of industrial space currently under construction in New Jersey’s core market is not enough to satisfy demand, which is being driven by the growing number of national retailers seeking a presence in the state.
Although there was more than 14 million square feet of industrial product under construction in New Jersey as recently as 18 months ago, much of the new space has already been leased. As a result, tenants are facing steep rent increases, and large tenants are committing to planned developments that are not yet under construction.
Asking rents in New Jersey’s three most highly sought-after submarkets – Bergen Central, Hudson Waterfront, and Meadowlands – have eclipsed double digits, and the state’s overall average has risen to $8.38 per square foot.
“Rents in prime submarkets continue to rise, and in some cases, lease rates are even higher than asking prices, especially for new construction,” said Alex Previdi, Managing Director at TCS. “The demand is such that there is an increase in opportunities for developments to accommodate some of the smaller users in the food, manufacturing, and transportation industries.”
For the first time, New Jersey’s industrial market has had five consecutive quarters in which year-over-year net absorption eclipsed 10 million square feet. From the first quarter of 2018 through the first quarter of this year, 18 of the state’s 25 submarkets recorded positive net absorption, with Exit 8A, Route 287 West, Exit 11/Perth Amboy/GSP, and Exit 14/Newark East each posting more than 1 million square feet of absorption.
Much of the leasing activity is taking place in manufacturing buildings, which, year-over-year, experienced nearly 1 million square feet of absorption and a spike in rents of more than 20 percent.
“New Jersey has added manufacturing jobs for five consecutive years, and consumer spending remains extremely strong, with the trend toward online shopping serving as the driving factor,” said Matthew Dolly, New Jersey Research Director at TCS. “Since this reality makes proximity to customers paramount, retailers that are not yet here continue to target New Jersey because of its access to the region’s densely populated, wealthy consumer base.”
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