The northern and central New Jersey industrial markets are continuing their remarkable run, with robust demand for space pushing rental rates to new highs while availability dropped to a historic low of 4.8%, according to CBRE’s Q3 report for industrial in New Jersey.
Northern and Central New Jersey recorded nearly 5.4 million square feet of leasing activity in the third quarter of 2021, a quarter-over-quarter decrease of 34.5% and a year-over-year decrease of 26.2%. Preleasing accounted for 1.8 million square feet of activity and leasing was dominated by consumer goods and third-party logistics companies. Year-to-date, leasing activity totaled over 22.4 million square feet, 37.5% ahead of the same period in 2020, which saw just 16.3 million square feet.
Average Class A asking rents in the combined Northern and Central New Jersey market climbed in Q3 2021, reaching $14.38 per square feet, a 6.9% increase quarter-over-quarter. The Class A average asking rent was up by a soaring 28.6% year-over-year, demonstrating the acceleration of competition in the New Jersey industrial market. Robust net absorption of 4.1 million square feet included 1.6 million square feet of new construction completions that were delivered fully preleased.
In particular, the market was constrained by a lack of large block availabilities in quality buildings, as well as a reluctance by owners of properties under construction to strike deals in a market where rents significantly increase month to month.
“This year’s strong first and second quarters are keeping the market on track for an exceptional year of leasing, though the lack of supply to meet demand may continue to constrain leasing as we round out the year,” CBRE Vice Chairman Thomas Monahan said. “The third quarter’s net absorption total resulted from a combination of strong leasing, the completion of 1.7 million square feet of new developments that were fully preleased and few large space additions.”
- Seven buildings completed construction in Q3 2021, totaling 1.65 million square feet with a cumulative prelease rate of 100%;
- The largest completion in the quarter was 150 Old New Brunswick Road in the Route 287/Exit 10 submarket, a 622,230-square-foot Class A building preleased by Bob’s Discount Furniture;
- Six projects began construction during the quarter, totaling 1.3 million square feet;
- 1 million square feet of the total starts were in Central New Jersey, while only 300,000 of the starts were in Northern New Jersey, where developable land is scarce.
On the investment sales front, activity ticked up for the second straight quarter, increasing 9.7% quarter-over-quarter, to $616.6 million. The average sales price per square foot also increased quarter-over-quarter by 10.9%, to $142 per square foot. The most valuable individual investment sale during Q3 2021 was the $91 million sale ($332 per square foot) of 63 Stults Road in Dayton to CenterPoint Properties.