New Jersey’s industrial market is showing no signs of slowing down at the mid-year point of 2019, according to Cushman & Wakefield.
The East Rutherford-based commercial real estate services firm released its second quarter research findings on Monday, which said the Garden State’s office market continued upward as large deals propel demand and tenants are driven toward amenity-rich, high-quality office spaces.
Industrial sees record-low vacancy
C&W said robust industrial demand coupled with record-low vacancy (3.3%) and historically high asking rents ($9.27 per-square-foot) were recorded in the second quarter.
“New Jersey industrial conditions remain among the strongest in the nation,” Andrew Judd, New Jersey market leader, Cushman & Wakefield, said. “Growth in online sales and the need for next-day and same-day delivery persists for retailers. This was a major driver in year-to-date leasing activity reaching its highest total in three years.”
The firm recorded more than 15.1 million square feet of new industrial transactions in the first six months of 2019, a 27.9% increase year-over-year, it said. Industrial volume, which was fueled by e-commerce, retail and logistics companies, was supported through eight leases greater than 300,000 square feet, C&W said. The largest deals in the second quarter included an undisclosed tenant taking 593,730 square feet at 117 Interstate Blvd. in South Brunswick, Performance Team leasing 444,940 square feet at 3 Brick Yard Road in Cranbury and CEVA Logistics leasing 338,954 square feet at 152 Route 206 in Hillsborough.
“Our market is once again on pace to exceed 10 million square feet of annual industrial absorption,” Judd said. “New construction deliveries continue at a modest rate, with 1.8 million square feet completed during the past three months for a year-to-date total of 4.7 million square feet. Of the square footage delivered thus far in 2019, 72.5% was pre-leased, with a handful of other warehouses leased in full a few months after delivery.”
An additional 3.6 million square feet of industrial space is currently under construction, 46.8% of which has already been committed to, C&W said.
“As all indicators for New Jersey industrial remain positive, we expect vacancy for the New Jersey market will remain near historically low levels despite some large speculative deliveries anticipated later this year,” Judd said. “Demand will persevere, likely pushing asking rents to new record levels in some submarkets. While land constraints have become more evident in recent years, developers continue to find sites, including redevelopment opportunities and brownfield sites. We expect construction totals to remain solid, albeit not at the historical levels of 2017 and 2018.”
Office fundamentals strengthen
In the office sector, overall net absorption was positive for the fifth straight quarter, with more than 880,000 square feet of occupancy gains year-to-date.
“The continuous flight to quality has proved that many owners who invest capital and upgrade their assets will see better results,” Jason Price, tri-state suburbs research director, Cushman & Wakefield, said. “The suburban office market in New Jersey has seen a slow and steady recovery as a whole, which could be somewhat due to millennials beginning to make their moves back to the suburbs as they age and have families.”
The office market saw vacancy improvements year-over-year, with the overall rate falling 130 basis points to 17.1%. After a strong start in Q1, office leasing demand decreased slightly in the second quarter, with 1.9 million square feet of new deals signed. However, the 4.1 million-square-foot year-to-date leasing total is the strongest in three years.
“Nearly 60% this activity has occurred within Class A properties,” Price said. “Small- and mid-size leases continue to propel demand, with 72.6% of office activity year-to-date involving deals under 50,000 square feet. The most active industries have included life sciences, technology, legal, health care and educational services.”
Among office market highlights, IBM renewed 131,000 square feet at 194 Wood Avenue South in Iselin, IQVIA subleased 115,500 square feet at 77 Corporate Drive in Bridgewater and Genmab leased 90,000 square feet at 777 Scudders Mill Road in Plainsboro.
C&W said as the market strengthens, office rents will trend up.
The overall asking rental rate for New Jersey rose to $29.59 per-square-foot at the mid-year point of this year. Class A asking rents rose $0.24 in the second quarter to $33.84 per-square-foot, resulting in a 1% year-over-year increase.