Northern and central New Jersey real estate had a robust third quarter due to continued historic industrial market fundamentals and measurable office sector improvement, according to Colliers International NJ’s latest regional Market Snapshot.
The availability rate dropped 20 points, to 6.3 percent, with record-setting demand and consistent positive net absorption.
“This demand, in conjunction with new Class A properties that have been recently developed, has pushed industrial asking rents in our region to new levels,” said David A. Simon, executive managing director of the Society of Industrial and Office Realtors. “New Jersey’s industrial average asking rent today is $7.13 per square foot, which is 15.4 percent higher than this time last year.
“At the same time, while activity remains strong, the shortage of existing available inventory has made it difficult for industrial users to find new locations, and the result of limited inventory has led to less transactions being completed. In fact, quarterly industrial leasing activity dropped below 10 million square feet, to 9.1 million square feet, for the first time since third-quarter 2015,” Simon added.
Several significant transactions closed, led by Wayfair’s 1.3 million-square-foot commitment at 1 Brick Yard Road in Cranbury, Rema Foods’ 320,867-square-foot lease at 2353 Route 130 in Dayton and RAB Lighting’s 264,085-square-foot lease at 10 Broadway Road in Cranbury.
During the quarter, 10 projects totaling 2.6 million square feet broke ground, bringing the total construction pipeline to 43 properties totaling 15 million square feet.
Northern New Jersey maintained its positive momentum for the 15th consecutive quarter, absorbing 1.3 million square feet of industrial space, lowering the availability rate to 7 percent.
At 4.1 million square feet, Northern New Jersey industrial leasing remained active, up 4.1 percent from this time last year.
The Port and Meadowlands submarkets continue to benefit from a majority of the demand, accounting for 71 percent of third-quarter leasing activity in Northern New Jersey.
Industrial tenants in search of new space have had difficulty in central New Jersey, where space is limited. As a result, leasing activity dropped for the second consecutive quarter, to 5 million square feet.
Still, net absorption totaled a positive 2.4 million square feet, driven by 1.8 million square feet of new industrial product delivery this quarter, all pre-leased.
Office leasing also dropped during the third quarter, to 2.2 million square feet, yet, overall market fundamentals continued to improve, fueled mostly by an increase in user-buyer transactions.
Five office user-sales of more than 70,000 square feet closed, contributing to 393,000 square feet in occupancy gains and representing a significant portion of the market’s total of 889,599 square feet in positive net absorption over the past three months.
“This dynamic pushed year-to-date net absorption in the black for the first time in 2017,” noted John Obeid, senior director of tri-state suburban research for Colliers. “At 20.2 percent, overall office availability improved 40 basis points quarter-over-quarter, reducing the total available space to 42.2 million square feet — the lowest total since year-end 2009.” As a result, average asking rents also showed improvement, rising 18 cents per square foot quarter-over-quarter, to $26.51 per square foot.
The Northern New Jersey office market continued to strengthen during the third quarter, with the availability rate improving by 90 basis points quarter-over-quarter, to 20.9 percent.
The availability of 11 out of the 13 submarkets tracked either remained stable or declined.
Northern New Jersey office leasing totaled 1.2 million square feet, an increase of 18 percent from last quarter. The Newark and Parsippany submarkets led the activity, accounting for 28.5 percent of the total.
Five of eight central New Jersey office submarkets recorded positive net absorption, with the 287 Corridor submarket seeing the most, at 111,499 square feet.
But the 316,682 square feet of negative absorption for Somerset/Route 78 submarket dampened what was otherwise sustained improvement for the region.
Central New Jersey office leasing totaled 983,611 square feet, with the Princeton submarket alone accounting for 30.8 percent of the activity. Notable regional leases included PNC Financial Service’s 88,914-square-foot renewal at 2 Tower Center in East Brunswick and Billtrust’s 88,759-square-foot lease at 1009 Lenox Drive in Lawrenceville.