There was strong demand for industrial space in New Jersey in the third quarter, continuing on a trend from the beginning of the year, however, the supply in the market is running low, according to CBRE‘s Q3 New Jersey Industrial market report.
The market’s overall clout was highlighted across all metrics besides leasing velocity due to high-quality spaces hindering deal making, CBRE said.
The average asking rent for all classes of industrial properties was up by $0.15 per-square-foot, marking a new high of $7.54 per-square-foot at the end of the third quarter. Class A industrial space in North and Central Jersey also saw a new record, going up to $9.28 per-square-foot in Q3. The availability rate for Class A space was under 1%, but for all classes was down to 5.9% — the lowest point in CBRE’s industrial data since 2001.
Due to the lack of desirable industrial space on the market, leasing activity was down by 18% from Q2 2019 to 5.49 million square feet and down by 8% from the same time last year. Also, net absorption decreased by 5% from Q2 2019 to 530,000 square feet — the second quarter in a row CBRE saw a declined.
“Demand for quality industrial space in New Jersey remains very strong as more e-commerce and last-mile logistics companies look to either expand or relocate their operations in the state,” William Waxman, executive vice president, CBRE, said. “Unfortunately, demand has once again outstripped supply. More new construction is needed to keep up with the demand that shows no signs of abating.”
CBRE said in the third quarter, construction started on five buildings, all in Central Jersey, totaling 2.63 million square feet. Completions totaled more than 989,000 square feet, comprised of four buildings with almost 839,000 square feet pre-leased. Two buildings, or 150,000 square feet in total, were completed in North Jersey.
Industrial sales were up slightly, CBRE found, by three transactions totaling almost 300,000 square feet. The type of buyer (investor vs. owner-user) was the biggest difference seen between the two quarters, with demand up for large blocks of industrial space and a large supply of cheap capital attracting more investor and institutional interest. Investors accounted for 22 deals in the third quarter, seven more than the same quarter in 2019. Owner-users accounted for 12 transactions with nearly 887,000 square feet of sale-leaseback deals. CBRE said sale-leasebacks are increasing due to owner-users “looking to capitalize on their rapidly appreciating assets.”
To see the full report, click here.