New Jersey recorded 8.6 million square feet of industrial leasing activity during the second quarter of 2018, according to Colliers International NJ LLC.
Second quarter leasing activity, Colliers said, is down from 10.6 million from the previous period, due to a lack of available space.
According to Colliers, office leasing during the past three months rose by 31 percent or 2.9 million square feet.
“During the first half of the year, ongoing demand for strategic distribution locations helped drive rental rates to historically high levels,” said David A. Simon, executive managing director and New Jersey market leader. “Our research revealed a decline in leasing activity during the past quarter; however, the reason for the decline was only based on the fact that there is not enough space to accommodate the demand.”
During the second quarter, 13 new buildings totaling 5.4 million square feet were delivered, but the availability rate remained flat, Colliers said.
According to Colliers, northern New Jersey’s industrial net absorption maintained a steady pace, with 3.5 million square feet of leasing activity outpacing the new space that was delivered to market. Positive net absorption rose to 1.9 million square feet, which is the highest level in more than a year. Central Jersey continued to capture the bulk of the demand in the first quarter, with 5.1 million square feet of industrial leasing activity.
“As demand for same-day deliveries intensifies, the Meadowlands and other submarkets within close proximity to New York City will continue to receive strong interest from occupiers,” Simon said. ”Consistent demand and limited supply has caused pricing to rise, up 6.7 percent from last year to $7.69 per-square-foot. As a result of these market conditions, the pool of investors focusing on the industrial sector within New Jersey is expanding as well.”
“Fundamentals in central New Jersey remain positive,” he said. “Despite 5 million square feet of new deliveries, central New Jersey’s availability rate was only 4.4 percent in the second quarter, remaining below the 5 percent threshold for the third consecutive quarter.”
Colliers said northern New Jersey’s office market activity fell to negative 385,427 square feet, dragging the mid-year total to negative 362,075 square feet. The Central Jersey market was different, with a 33.6% uptick in leasing activity from last quarter.
“Northern New Jersey’s slow start to the year impeded the progress of the market as a whole,” said John Obeid, senior director, Tri-State Suburban Research for Colliers. “Despite that, after recording just eight transactions over 100,000 square feet between 1Q 2017 and 1Q 2018, there were seven such transactions in the second quarter alone. Leasing activity increased by 31 percent quarter-over-quarter to 2.9 million square feet, which brought the mid year total to 5.1 million square feet. Increased activity, together with the ongoing adaptive reuse trend has kept the availability rate below 20 percent for the third consecutive quarter and, at 19.7 percent, is an improvement of 100 basis points from last year.”
As office products that are obsolete come off the market and more owners put money into renovations, the average asking rents have been rising, particularly in the Class A sector, Colliers said.
“While growth has been slow and steady, the long-term trend remains positive,” Obeid said.