The industrial market in New Jersey has continued to thrive in the third quarter of 2019, according to Cushman & Wakefield.
The commercial real estate firm on Friday released its latest industrial research and found historically high asking rents ($9.29 per-square-foot) and record low vacancies (3.2%) heading into the end of the year.
The market also showed 8.1 million square feet of warehouse product under development, which C&W said could push construction volume to “a century-high mark” next year.
“Developers are attempting to help replenish limited Class A supply to the marketplace amidst strong tenant interest in this prolonged expansion cycle,” Jason Price, Cushman & Wakefield’s director of Suburban Tri-State Research, said. “Twelve of the 17 facilities under construction are larger than 300,000 square feet; four exceed 800,000 square feet.”
Since the beginning of 2019, there has been 6.3 million square feet of new industrial space delivered, including 1.3 million square feet that came online in the third quarter.
“Demand for new product remains strong, evidenced by 69.1% preleasing on 2019 deliveries,” Price said. “This velocity shows no sign of slowing down and the development community is responding. In fact, we are anticipating more than 18.0 million square feet in the industrial pipeline through mid-2021.”
A lack of warehouse product led to a decline of new leasing in the quarter, with activity falling below 4.4 million square feet — the second time in six years demand was lower than 5 million square feet.
Highlights in the quarter include eight deals larger than 200,000 square feet, led by Home Depot’s 1.3 million-square-foot commitment in Perth Amboy.
“With 19.4 million square feet of new transactions signed year-to-date, new leasing activity has fallen behind last year’s pace by 4.7%,” Andrew Judd, New Jersey market leader at Cushman & Wakefield, said. “At the same time, renewal activity rose markedly during the past three months, with 3.9 million square feet of completed lease extensions.”
Absorption totals also show a scarcity of available industry space, C&W said.
Net occupancy gains totaled 1.3 million square feet in the quarter, bringing 2019’s total to 7.2 million square feet, well below last year’s 14.5 million square feet. Industrial vacancy remained modest at 3.2%, dipping 10 basis points since mid-year. In warehouse space, the rate dropped back to the historic low of 3%. Also, four New Jersey Turnpike corridor submarkets had rates under 1.5%, including the Upper 287, Exit 9, Exit 8 and Exit 7A/8.
The firm said it is projecting vacancy totals to remain steady into 2020.
“In the near-term, the local industrial marketplace will remain fundamentally healthy and poised for further growth – driven largely by logistics and eCommerce companies relocating and expanding within the marketplace,” Judd said. “Despite land constraints, developers will continue to add new supply to the marketplace as tenant demand endures and existing Class A space options remain limited.”