Northern and central New Jersey industrial markets reached a record-low availability rate of just 4.4% amid robust rental growth and steady positive absorption, despite a dearth of product and growing economic concerns, according to CBRE‘s latest second-quarter 2022 figures, released Tuesday.
Net absorption was positive for the 22nd straight quarter at 1.5 million square feet, unchanged from Q1 2022’s total. Overall vacancy remained relatively unchanged, at 2.2%, while Class A availability and vacancy moved slightly lower, to 0.8%, with no deliveries of available Class A space during the quarter. Class A rents continued their rapid rise during Q2, increasing 6.4% quarter-over-quarter and 30% year-over-year, to $17.54 per square foot. The average asking rent for all classes increased 13% quarter-over-quarter and 56% year-over-year, to a new high of $13.86 per square foot.
“Looming economic uncertainty created some headwinds for New Jersey’s industrial market, albeit fundamentally sound, causing employment gains to slow as economic conditions have tempered from just a few months ago,” Thomas Monahan, a vice chairman at CBRE, stated. “The quarter’s leasing volume was softer compared to previous periods, reflecting both the lack of available product but also waning occupier demand.”
After a resurgent first quarter, northern and central New Jersey leasing activity slowed in Q2, with leasing activity of 4.5 million square feet, down 27% quarter-over quarter and 45% year-over-year. The Q2 total was 29% below the five-year quarterly average. Leasing and renewal activity during the quarter was dominated by third-party logistics companies that accounted for 50% of all activity, while manufacturing and wholesale/retail companies each comprised 16%. Leasing activity through the first half of the year totaled 9.9 million square feet, down 42% from the first half of 2021 and 23% lower than the average first half totals of the last five years.
There were 18 deals of 100,000 square feet or greater signed in the second quarter, compared to 33 in the first quarter of 2022. Among these large transactions, average deal size decreased slightly, to 198,000 square feet from 205,000 square feet in Q1 2022.
Northern New Jersey posted 2.2 million square feet in new deals in Q2 2022, down 31% from the first quarter. The Morris submarket recorded the highest leasing total, at 894,000 square feet. The bulk of that total was the result of List Logistics’ 844,000-square-foot lease at 703 Bartley Chester Road in Flanders, which was the largest lease in the combined northern and central New Jersey market this quarter.
Leasing activity in central New Jersey contracted 23% quarter-over-quarter, with 2.3 million square feet of new leases. The Exit 8A submarket recorded the largest leasing total, with 923,000 square feet, 27% greater than the first quarter’s total. Yami Buy, an online retailer specializing in Asian goods, signed the largest lease in Exit 8A, for 274,000 square feet at 1165 Cranbury South River Road.