New Jersey’s industrial market is expected to decline on the short term into the second quarter as the novel coronavirus spreads, with the energy, tourism, hospitality, entertainment and small business sectors bearing the brunt of it.
However, experts predict the economy to resume growth moving into the third and fourth quarter of the year — even with spending hampered by layoffs and economic uncertainty — as long as social distancing measures continue to flatten the curve.
According to Transwestern‘s Q1 2020 New Jersey Industrial Market Report, the amount of space returning to the market outpaced leasing velocity for the first time in seven years, increasing the overall vacancy rate to 3.8%. E-commerce and logistics firms amassed the most warehouse and distribution space. Amazon’s 661,741-square-foot distribution center in Newark was the the largest lease signed in the quarter.
Negative net absorption was seen in 14 of the 25 submarkets in the past three months, however, most saw positive net absorption over the last 12 months as occupancy levels increased by 4.5 million square feet.
At the end of Q1, product under construction was at it highest level in two years with 16 of the 25 submarkets launching new projects. Delivery dates are anticipated to be pushed back while construction is halted due to COVID-19.
Higher asking rents in new properties, combined with increases in existing product, pushed rental rates to a new high. At the end of Q1 2020, the asking rent for industrial buildings was $8.95 per-square-foot, compared to Q4 2019’s $8.73 and is 7% higher year-over-year.
A limited amount of inventory caused overall sales volume to dwindle for the second quarter in a row and fall to its lowest level since Q2 2018. Real estate investment trusts accounted for half of the total sales volume in the first quarter.