CBRE: North, Central Jersey industrial rents continue to climb in Q2

Though leasing slowed some over the second quarter of 2022, net absorption for the period in the industrial sector was positive for the 22nd-straight quarter at 1.5 million square feet. According to CBRE‘s Q2 2022 Figures for the Northern and Central New Jersey industrial markets, released July 12, that number is unchanged from the first quarter’s total.

Meanwhile, rents were up across all classes in the sector (by 13% quarter over quarter and 56% year over year) to a new average high of $13.86 per-square-foot.

For Class A space, Q2 showed a 6.4% increase quarter over quarter and was 30% higher than Q2 of 2021, hitting an average $17.54 per square foot. CBRE attributed the rise from Q1 to a combination of landlords increasing rents amid the historically tight market – the overall vacancy rate was 2.2% in Q2 with a 0.8% rate for Class A space – and several construction starts in the relatively more expensive submarkets of Newark and Linden/Elizabeth.

In the North, the Newark submarket – the tightest in the state, according to CBRE – posted the highest Class A average asking rent, up 23% quarter over quarter and 87% year over year to $30.85 per-square-foot.

In the Central Region, the Linden/Elizabeth submarket’s $20.48 per-square-foot average asking rate was the highest, followed closely by Carteret/Avenel at $19.66 per square foot. In the latter submarket, CBRE noted that several 500,000-square-foot construction projects are underway. Overall, Class A asking rents were up by 8.3% quarter over quarter and 30% year over year in the region to an average $16.37 per square foot—a result of construction projects not just in Carteret/Avenel, but in the Suburban Essex and Route 287/Exit 10 submarkets, as well, in addition to the upward revision of rents at other developments.

Leasing for the second quarter was down 27% quarter over quarter and 45% year over year. While CBRE cited a lack of inventory as contributing to this decline, it also referenced increasing wariness from occupiers when it comes to large leases as the economy engenders skepticism.

Just 18 deals for 100,000 square feet or more were reached in Q2, while 33 were signed in the first quarter. Additionally, CBRE said the average deal size was down: at 198,000 square feet, compared to 205,000 square feet in Q1 2022.

“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,” Vice Chairman Thomas Monahan said in a statement.

“The quarter’s leasing volume was softer compared to previous periods reflecting both the lack of available product but also waning occupier demand,” he added.

Altogether, leasing totaled 9.9 million square feet for the first half of the year, down 42% from same period in 2021, and 23% under the average of half-year-totals from the past five years. That activity saw the largest share of space go to third-party logistics companies (50%); manufacturing and wholesale/retail companies each accounting for 16%.

In the northern part of the state, the Morris submarket saw the most activity in Q2 with 894,000 square feet leased, including the largest lease across the combined Northern and Central market for Q2: List Logistics’ 844,000-square-foot deal in Flanders. Meanwhile, in Central Jersey Exit 8A scored the highest leasing total – 923,000 square feet – up 27% from Q1. Overall, the Central region shrunk by 23% quarter over quarter, recording 2.3 million square feet of new leases.