The state’s industrial market showed signs of leasing slowdown in the first quarter of 2020 — a level not seen since Q4 2012, according to CBRE’s Q1 2020 Marketview report.
After a strong end to 2019, leasing activity slowed in the first quarter of the year to 3.8 million square feet, 56% less than the previous quarter and 44% less year-over-year, due to smaller lease sizes, the report found. Renewals accounted for 1.23 million-square-feet in the first quarter, 21% up from Q4 2019, but 13% less year-over-year.
The COVID-19 pandemic, CBRE said, made some occupiers slow leasing plans and reconsider long-term commitments, however, several large e-commerce, third-party logistics and medical companies moved forward with transactions.
The average asking rent for Class A space in North and Central Jersey was down by 1% quarter-over-quarter to $10.36 per-square-foot, compared to the 4% uptick year-over-year. However, asking rents for all property types was stable quarter-over-quarter at $7.52 per-square-foot, an increase of 3.7% from a year ago.
Total availability increased to 497,000 square feet, pushing the rate up 10 basis points to 6.1% from Q4 2o19’s 6%. Even with the slight increase, the rate was 30 bps lower year-over-year.
Despite low leasing levels, net absorption for the quarter was strong and hit a positive 782,131 square feet. The biggest contributor was the Newark submarket, which had net absorption of 524,819 square feet, and the Route 287-Exit 10 submarket, with 462,000 square feet.
The development pipeline hit 14.5 million square feet, expanding by nearly 4 million square feet as investors pushed projects forward to maximize returns on strong rents.
At the end of the quarter, 38 buildings totaling 14.5 million square feet were under construction, up from 28 and 10.3 million square feet last quarter.