New Jersey’s industrial real estate leasing activity remained high in 2017, fueled by a fourth-quarter surge, but office leasing slumped to a nine-year low as its Q4 figures stumbled, according to a report from Colliers International NNJ LLC.
The commercial real estate services firm said in its 2017 Market Snapshots that industrial leasing reached 44.8 million square feet in 201, the third straight year over the 40 million mark. But office leasing levels reached only 9.5 million square feet, the lowest annual total since 2008.
Industrial tenants followed a slow summer and fall with 13.9 million square feet in leases during the final quarter of the year, a 52.8 percent gain quarter-over-quarter, Colliers said.
“2017 industrial leasing was up 7 percent over the previous five-year average of 41.7 million square feet,” David A. Simon, executive managing director and New Jersey market leader, said in a prepared statement. “Robust tenant demand continues to drive down the availability rate, even though new product is being brought to the market at a rapid pace. With just 6.1 percent industrial availability, developers have accelerated their construction schedules.”
Simon said 10 projects, totaling 4.5 million square feet, broke ground in Q4, bolstering the pipeline to 45 properties and 17.1 million square feet.
Average asking rents also rose, reaching a record $7.23 per square foot, up from $6.43 at year-end 2016.
Central Jersey recorded 8.4 million square feet of fourth-quarter leasing, for a 2017 total of 27.1 million square feet, which was the second-highest annual total on record, Colliers said. North Jersey added 5.5 million square feet in Q4, marking a 16th consecutive quarter of positive absorption.
While office markets struggled in 2017, Colliers said this year may be a different story.
“New Jersey office leasing in 2015 and 2016 saw its best two-year performance in more than a decade, so 2017’s lackluster performance came as a bit of a surprise,” John Obeid, senior director, Tri-State Suburban Research, for Colliers, said in a statement.
North Jersey faced a slowdown in Q4 activity, combined with new availabilities, which resulted in negative net absorption, Colliers said. Meanwhile, in Central Jersey, lack of demand pushed activity down to three-year lows.
However, Obeid said, a number of large transactions are expected to close in Q1 of 2018, “which will help the new year get off to a strong start.”