Demand for industrial logistics space in the 1.75 billion-square-foot Northeast Industrial Region (New York, New Jersey, Pennsylvania, and Delaware) has swelled dramatically with the growth of e-commerce, according to the latest New Jersey Industrial Insight Q3 2021 report from JLL.
The market is comprised of both last-mile distribution submarkets and some of the nation’s preeminent regional distribution hubs. As tenants have become more sophisticated, state and former market delineations continue to blur and be less of a barrier for industrial requirements, which now search across the region as a whole.
The proliferation of e-commerce has shifted real estate demand away from brick–and-mortar storefronts to industrial facilities with immediate access to large swaths of the U.S. population. Consequentially, industrial demand for the Northeast has swelled.
As of the second quarter of 2021, 85.3 million square feet of industrial demand was searching for facilities in the Northeast, a 20.8% rise over the past two years.
Class A vacancy plummeted to 1.8%, as accelerated demand outpaced the uptick in construction activity — Class A vacancy in New Jersey is 0.2%.
This hyperlow vacancy combined with inflationary pressures has caused outsized rent growth. Notably, northern New Jersey has seen 30% year-over-year rent increases, while New York City has seen a 26.3% increase. Average rent growth in the region reached 22.4% year-over-year, with infill markets experiencing outsized gains.
Leasing velocity has soared past pre-pandemic volumes, suggesting elevated leasing volumes are here to stay. Over 85 million square feet has been leased in the first nine months of the year, 56.3% higher than the four-year trailing average.
Industrial values reached record heights as cap rates dipped below 3% in some core markets.