Northern and central New Jersey’s industrial market reached another record-low availability rate, dropping to 4.1% with positive absorption of 594,000 square feet — the 23rd consecutive quarter of positive absorption — according to CBRE’s Q3 2022 Figures report, released Thursday.
As a result, the average asking rent for all classes increased 6.1% quarter-over-quarter and 51% year-over-year to a new high of $14.69 per square foot.
According to CBRE, Class A rents jumped 4.9% quarter-over-quarter and 28% year-over-year to end Q3 at $18.40 per square foot. While asking rents continued to increase, leasing activity during the third quarter was slightly lower than Q2. At 4.6 million square feet, leasing activity is 14% less year-over-year, primarily due to a lack of quality product available to meet demand and some uneasiness about the overall economy for the remainder of the year.
“Overall, the market is showing great resiliency, with low availability rates and strong absorption despite economic uncertainty due to rising interest rates and inflation,” Kevin Dudley, an executive vice president at CBRE stated. “Leasing activity was slightly lower in Q3, but the New Jersey industrial market is continuing to show strength.”
Despite softer leasing, demand for industrial space remained strong during the quarter, according to CBRE. E-commerce companies once again led the way in the market’s leasing and renewal activity, with e-commerce tenants accounting for 38% of all the activity during Q3, followed by wholesale/retail users (34%), third-party logistics (17%) and manufacturing (11%).
Central Jersey posted the highest leasing total at 3.4 million square feet, up 48% from Q2. The Hunterdon/Warren County submarket recorded the highest leasing total at 1.3 million square feet, driven almost entirely by Shopify’s 1.25 million-square-foot lease at 3000 Rand Blvd. in Phillipsburg. Linden/Elizabeth had the second-highest leasing total for Q3 at 880,000 square feet, primarily due to Samsung’s 735,000-square-foot lease at 700 Linden Logistics Way in Linden.
North Jersey posted 1.2 million square feet in new leases, with the Meadowlands submarket recording the highest leasing total at 324,076 square feet, led by a 123,000-square-foot lease at 77-79 Metro Way in Secaucus.
CBRE’s report said the problems associated with inflation continue to run their course, with aggressive rate hikes raising the cost of capital and forcing firms to rethink hiring plans. The looming economic uncertainty is creating headwinds for New Jersey’s industrial-using employers, as employment gains continue to slow.
Trade, Transportation and Utilities, a sector that includes warehouse and logistics firms,
saw employment increase to 103% of the pre-pandemic level, up from 102% at the end of Q2. The manufacturing sector, another major user of industrial space, saw a modest
improvement to 98.1% of the pre-pandemic level, up from 98% at the end of Q2.
New Jersey’s overall unemployment rate ticked upwards in Q3 to 4%, still down
considerably from the pandemic peak of 15.8% in May 2020, but slightly above the national unemployment rate of 3.7%. The economy is expected to contract early next year, resulting in a rise in unemployment and pushing inflation down toward 3% by year-end 2023.