New Jersey’s industrial real estate leasing activity has slowed in the third quarter of 2019, driven by a lack of available space in the market, according to a report from Colliers International.
The commercial real estate services firm said in its New Jersey Industrial 3Q 2019 Market Snapshot that total leasing activity hit 8.9 million square feet, down 15% from last year.
The report said demand in the first half of the year boosted year-to-date leasing to 30.2 million square feet, up from 29.8 million square feet over the same period last year.
With fewer available options for new space, renewal activity increased this month, accounting for 32.9% of total leasing activity, compared to 20.8% last quarter and 13.8% last year. The activity was driven by Barnes and Noble’s 1.1 million square foot extension in Monroe, Colliers said.
The uptick in renewals combined with tenant demand for development sites resulted in lower than average net absorption, which hit a positive 509,739 square feet, Colliers found.
Colliers suggested the lack of availability coupled with higher priced construction product has put pressure on asking rents. At $8.90 per-square-foot, the industrial asking rent was up 12.2% year-over-year.
In North Jersey, tenant demand was strong in the quarter but net absorption was negative for the first time since 2014.
The lack of availability (5.8%), particularly big-box Class A product, made it hard for tenants to find space. This is the third consecutive quarter the availability rate has remained below 6%.
The average asking rent ($9.41 per square foot) has increased to 17.2% from last year.
In Central Jersey, industrial demand greatly reduced the available space remaining. During the quarter, net absorption hit a positive 859,541 square feet, keeping the availability rate at 3.7%.
The lack of space, Colliers said, has led many developers to accelerate their construction piplines. In the third quarter, 15 new projects broke ground, totaling 5.9 million square feet.
At 5.3 million square feet, leasing activity has remained strong, but demand is continued to be driven by a preference for Class A product, which accounted for 68.1% of the market.
The average asking rent, which reached $8.02 per square foot, has remained at historic levels, Colliers said.