The North and Central Jersey industrial market has started this year off “red hot,” according to Cushman & Wakefield.
“As the New Jersey industrial market lies within the largest consumer base and one of the busiest ports of entry in the United States, market fundamentals should remain strong throughout the year,” said Andrew Judd, Cushman & Wakefield’s New Jersey market leader. “We anticipate that leasing totals will remain on pace with previous recent quarters, as some large deals are expected to close in the coming months, helping to further bolster absorption. And while some geopolitical issues are evident, demand for space is so robust that the local industrial market may see even more growth in 2018.”
According to the firm, overall vacancy fell to 3.6 percent in northern and central New Jersey. For warehouse space, vacancy reached a historic low of 3.5 percent.
Many of the New Jersey Turnpike submarkets south of Exit 13 had quarterly declines in vacancy — Exit 8A’s vacancy for warehouse and development space fell to 1.5 percent. The Upper 287 Corridor had a vacancy rate of 0.7 percent for warehouse space, the lowest in the Garden State over the last two years.
The industrial market in the Garden State had approximately 3.9 million square feet of net absorption during the first quarter, marking the fourth straight quarter in which the area has experienced more than 3.8 million square feet of occupancy gains.
Jason Price, New Jersey research director, said the vigorous absorption totals for the first quarter come from a healthy demand within existing products and the deliveries of leased up new construction.
Price said that another 2.5 million square feet of industrial product was delivered in the first quarter, mostly in Central Jersey, with 68 percent of new product already leased. The largest project was a 302,020 square foot warehouse near Exit 8A by Adler Development. Meanwhile, in North Jersey, Snow Joe leased a 271,195-square-foot warehouse at 100 Performance Drive in Mahwah.
Even with new deliveries, another 8.5 million square feet of industrial product is under construction, with 54 percent already leased. More than 515,000 square feet is currently under construction in Totowa at 150 Totowa Road, and 510,000 square feet is being built in Hillsborough at the Midpoint Logistics Center.
For new transactions in the state, approximately 6.4 million square feet were completed in the first three months of the year. Meanwhile, the Meadowlands submarket recorded 760,000 square feet of new transactions during the first quarter.
Eight new leases greater than 200,000 square feet were signed this quarter, including:
- TJ Maxx, 459,000 square feet, 50 Bryla St. in Carteret;
- 4PX Logistics, 354-302 square feet, 1000 High St. in Perth Amboy;
- US E Logistics, 340,000 square feet, 100 Cranbury South River Road in South Brunswick;
- XPO Logistics, 296,000 square feet and 175,453 square feet at Buildings 1 and 3 at Park 130;
- Hall’s Warehouse 278,000 square feet, Access Road in Piscataway.
Because of huge demands for and a dwindling supply of space, asking rents ticked higher, the firm said.
New Jersey experienced a 9.2 percent increase in asking rents for industrial space over the last year, ending the first quarter at $8.21 per square foot.
For warehouse space, the increase was 14.3 percent, bringing rents to $7.93 per square foot.
“Despite some large blocks of space potentially becoming vacant later in the year, demand should offset much of the new availabilities and speculative development,” Price said. “And while asking rents in the core submarkets are projected to rise further, they could begin to grow at a more moderate pace due to the lack of available, modern, Class A space. Finally, developments will persist along the NJ Turnpike and a little further west. The strong appetite for modern warehouse space will likely continue to keep occupancy rates high in newly built facilities.”