CBRE: Class A industrial properties drive N.J. market

Class A industrial properties in North and Central New Jersey are driving the market, according to a new CBRE report released Wednesday.

In the report, CBRE compared the statistical performance of Class A properties against the overall market during the past 10 years.

Here are some key findings:

In the past five years, 75 Class A buildings, totaling 28 million square feet, have been added to New Jersey’s inventory. Class B and Class C inventories decreased by a combined 4.5 million square feet over the same period. Overall, Class A buildings total more than 88 million square feet and comprise about 11 percent of the market.

Class A availability and vacancy have dropped abruptly over the past five and 10 years. Availability rates have fallen 20 percent since Q3 2008 to 4.7 percent in Q2 2018, despite more than 40 million square feet of new Class A spaces. Since reaching its peak at 12.2 percent in 2010, the overall availability rate has decreased by 520 basis points to 7 percent.

Over the past five years, Class A rents have increased by $5.58 per-square-foot, a growth of approximately 110 percent, from $5.09 to $10.67 per-square-foot. Overall, the asking average rate for the entire market has increased by $2.74 per-square-foot, a growth rate of 34 percent.

Between 2008 and Q2 2018, Class A absorption totaled about 49 millions square feet. Abou 60 percent of the Class A absorption happened in the past five years.

“One of the main reasons for the success of the Class A industrial market is the consistent growth of e-commerce and, along with it, the growing demand for efficient facilities that can accommodate ‘last mile’ delivery solutions,” Thomas Monahan, vice chairman of CBRE’s New Jersey Industrial and Logistics Practice, said. “New generation Class A facilities, with their larger size, expanded ceiling heights, wider column spacing, super-flat floors, perimeter security and expanded truck and car parking capacity, are best suited to accommodate the growing demands of e-commerce companies.”

There is about 11.4 million square feet of Class A industrial space currently under construction, with approximately 52 percent of it speculative and 48 percent built-to-suit. The majority of new product (8.6 million square feet or 75 percent) is in Central Jersey. The largest concentration is in the Route 287/Exit 10 submarket with 2.6 million square feet and in the Exit 8A submarket with 4 million square feet.

To see the full report, click here.