In the second quarter of 2020, the industrial market continued showing signs of strength, but the office market slowed significantly, according to Colliers International’s Q2 2020 New Jersey Office and Industrial Market report.
The pandemic is anticipated to slow activity down in both sectors in the short-term, Colliers said.
Despite the spread of COVID, the state’s industrial market continued to improve, Colliers said. Social distancing measures helped push a shift toward e-commerce purchases, which will eventually increase demand for distribution space.
Key Q2 takeaways:
- Leasing activity totaled 10.2 million square feet, up 11.7% from Q1;
- Amazon was a top demand driver, responsible for 10 deals, totaling 2.3 million square feet;
- Absorption is up this quarter at 3.9 million square feet, up 17.5% from its three-year quarterly average;
- The availability rate dropped 0.1% of a percentage point from last quarter to 4.5%;
- Overall average asking rents are up 5.3% year-over-year to $9.07 per-square-foot;
- Average asking rents in North Jersey are up 5% year-over-year to $9.55 per-square-foot;
- Average asking rents in Central Jersey are up 3.2% year-over-year to $8.26 per-square-foot.
As the state starts emerging from quarantine, businesses are expected to phase-in reopening, Colliers said. In the second quarter, COVID-19 had a huge impact on the slowdown of office leasing activity. Renewals accounted for most of the demand since new lease negotiations were disrupted by the pandemic.
Key Q2 takeaways:
- Renewals accounted for 60% of the 1.2 million square feet leased (typically accounts for 25-30%);
- Nine out of the Top 10 transactions were tenant recommitments of their current space;
- The availability rate increased 70 basis points year-over-year to 19.3%;
- The overall average asking rent was up by 1.2% from last quarter to $28.59 per-square-foot;
- Average asking rents in North Jersey were up 4% from last year to $30.44 per-square-foot;
- Average asking rents in Central Jersey were up by $0.08 from last quarter to $25.66 per-square-foot.