The first quarter of 2020 opened with signs of strength in the industrial market, but a lack of energy in the office market, according to Colliers International‘s Q1 New Jersey industrial and office market snapshots.
The economic impact of COVID-19, Colliers said, has not yet been materialized in the data, but it is expected to have a major short-term impact with supply chain disruptions having the largest effect on the industrial and logistics market.
A slowdown of leasing activity is expected in both sectors in the short-term, Colliers said. But once social distancing mandates are lifted, demand will gradually return back to the increased market demand seen in 2010 and 2011 after the Great Recession.
Industrial
The state’s industrial market was energized in the first quarter, with Class A product accounting for seven out of the Top 10 transactions in the quarter despite a lack of available space, Colliers said.
Key Q1 takeaways include:
- Amazon was a top driver of demand, responsible for five deals, totaling 1.8 million square feet;
- New construction spiked with 10 new buildings totaling 4.2 million square feet being delivered;
- This is the 29th consecutive quarter of positive net absorption;
- The availability rate improved by 30 basis points from last quarter to 4.6%;
- Average asking rents are up 5.7% year-over-year to $8.90 per-square-foot;
- North Jersey’s leasing activity increased 52.6% year-over-year to 5.1 million square feet.
Office
The state’s office market lacked strength in the first quarter, as leasing activity slowed and several large blocks of space returned to the market, Colliers said.
Key Q1 takeaways include:
- This was the lowest quarterly total in three years for net absorption, at a negative 305,945 square feet;
- The availability rate improved by 30 basis points from last quarter to 18.7%;
- There were seven new blocks of space (each 75,000+ square feet) that returned to the market;
- The Metropark submarket saw its availability rate improve 240 basis points from last quarter to 16%;
- Overall leasing activity hit 2.2 million square feet compared to last quarter’s 2.8 million square feet;
- North Jersey’s net absorption totaled negative 296,288 square feet;
- Central Jersey’s availability rate remained unchanged at 18% and net absorption was a negative 9,657 square feet.
