New Jersey’s industrial leasing activity has continued on an upward path, increasing 8 percent from its five-year quarterly average to 10.6 million square feet, according to Colliers International NJ LLC‘s third-quarter 2018 Market Snapshots.
The upswing, Colliers said, is due to the demand for big-box leases. Occupancy gains also increased the availability rate to 5 percent which results in the state’s 23rd consecutive quarter of positive net absorption.
There was also 2.9 million square feet of office leasing activity this quarter, up about 32 percent from last year.
“Leasing activity in both the office and industrial markets remain robust,” Dennis Waggner, executive managing director, market leader, New Jersey region, Colliers International, said. “There remains a healthy pipeline of users in the market who are anticipated to sign leases during the fourth quarter, pointing to a strong close for 2018.”
North Jersey continued to show industrial improvement, the report said, with 1.7 million square feet of positive net absorption. The growth spurred owners to increase their average asking rents, which closed the quarter at $8.03 per-square-foot.
“Demand for warehouse space and distribution centers remains robust,” said Noah Balanoff, Executive Managing Director.
Balanoff said that positive net absorption was posted “despite the massive 1.4 million square-foot former Toys R Us distribution center at 703 Bartley Chester Road in Flanders becoming available this quarter.”
Leasing activity in North Jersey increased by 31 percent to 4.6 million square feet compared to the second quarter “driven by robust demand in the Port market, led by Article’s 340,849-square-foot lease at 25 Colony Road in Jersey City,” Balanoff said.
In Central Jersey, the Exit 8A submarket led in the third quarter with a 526,400-square-foot lease by XPO Logistics at 115 Insterstate Blvd. in South Brunswick. Other noteworthy leases include 492,276 square feet leased by The RealReal Inc. in Perth Amboy and 416,300 square feet leased at 300 Prospect Plains Road in Cranbury.
“Central New Jersey’s industrial market continued to capture a majority of the space demand, leading the state in both net absorption and leasing activity for the sixth consecutive quarter,” Balanoff said. “Tenant demand for big-box distribution centers is driving this trend, as the central part of the state accounted for all but two of the eight leases signed in excess of 300,000 square feet. The average asking rent increased 13.3% year-over-year to $7.51 per square foot, closing the gap on the rental rate spread between Central New Jersey and Northern New Jersey.”
Office leasing activity also improved as large tenants relocated and grew within the state. Leasing activity, at 2.9 million square feet statewide, is up 31.8 percent from last year. This helped net absorption rise to almost 1 million square feet.
“Two key northern New Jersey office transactions accounted for the majority of the positive movement this quarter,” John Obeid, senior director, tri-state suburban research for Colliers, said. “Teva Pharmaceutical’s 345,488-square-foot expansion and renewal at 400 Interpace Parkway in Parsippany, and Ralph Lauren’s 255,018-square-foot lease at 100 Metro Boulevard at ON3 in Nutley helped improve the availability rate by 50 basis points quarter-over-quarter to 19.2 percent, the lowest since Q1 2009.”
Leasing activity in North Jersey reached its highest quarterly total since 2016’s third quarter, Obeid said.
“Driven by the Grow NJ Assistance Program, which has helped attract and retain major tenants, multiple companies including the top three new leases or expansions, relocated their headquarters within New Jersey. The new transactions, along with others, helped lower the availability rate to 19.6 percent, a 100 basis-point improvement from last quarter,” he said.
In Central Jersey office leasing slowed this quarter, Colliers said. The market posted 174,850 square feet of negative net absorption in the quarter, primarily from two new blocks of available space. In the East Interstate 78 submarket, 210,500 square feet of space became available in Warren and AECOM put 155,696 square feet up on the market in Princeton. This helped drive the availability rate to 18.7 percent.
“The long-term trend still remains positive, as the availability rate is down 50 basis points from the prior year,” Obeid said. “Leasing activity was relatively strong this quarter, totaling 892,184 square feet, and was led by Insmed’s 117,022 square-foot lease at 700 Route 202/206 in Bridgewater.”