The New Jersey market continued to exhibit tremendous strength with leasing velocity of 5.9 million square feet, a 23.2 percent increase year-over-year according to CBRE’s Q2 2018 industrial market report. Third-party logistics providers (3PLs) drove the market, along with apparel manufacturers and distributors. As a result of robust leasing and continued demand, sustained supply shortages remained despite a construction pipeline of 11.4 million square feet across 31 buildings.
At 5.9 million square feet, second quarter leasing velocity was down 4.9 percent from the first quarter. Activity was hampered by ongoing supply shortages, as new construction struggled to keep pace with demand, especially for buildings over 600,000 square feet.
During the second quarter, net absorption for the New Jersey industrial market was a positive 528,000 square feet Northern New Jersey was the market leader with more than 1.3 million square feet of absorption for the quarter, bringing its total net absorption year-to-date to a positive 283,000 square feet By contrast, Central New Jersey ended the second quarter at a negative 787,000 square feet. However, a strong first quarter helped the submarket post positive net absorption of 783,000 square feet at the midway point of 2018.
“Demand for large blocks of quality industrial space continued to outstrip supply during the second quarter of the year despite a healthy dose of new construction,” said Thomas Monahan, vice chairman, CBRE. “Nearly two million square feet of space was delivered in the second quarter, 64 percent of which was pre-committed. Further inhibiting market equilibrium is the ongoing trend of construction pre-leasing, with 47.2 percent of new product currently under development being spoken for prior to delivery.”
Strong demand and the lack of supply also helped average asking rents hit an all-time high of $7.00 per square feet, an increase of $0.08 per square feet quarter-over-quarter and $0.48 per square feet year-over-year. This current rate was $1.07 per square feet above the five-year average for the market.
On the investment sales front, the market experienced $186 million in total sales, representing more than 1.9 million square feet, resulting in in an average sale price of approximately $97 per square feet. The numbers were down, however, from the prior quarter when sales volume totaled $289 million for more than 3.4 million square feet at an average of roughly $83 per square feet, which is due primarily to normal market fluctuations. Although total sales fell by more than $100 million quarter-over-quarter, the average price in the second quarter was nearly 17% higher.
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