New Jersey’s industrial leasing and sales market continued to exhibit vigorous demand during the third quarter of 2019, according to CBRE’s latest market report. The market’s overall strength was illustrated across all metrics with the exception of leasing velocity.
The average asking rent for all classes of industrial properties climbed by $0.15 per square foot and set a new high of $7.54 per square foot to end the third quarter. Class A industrial space in northern and central New Jersey also saw record-high asking rents of $9.28 per square foot in Q3 with the highest priced average asking rent for Class A space in North and Central New Jersey being $13.68 per square foot in the Meadowlands. The availability rate for Class A space in most submarkets is under one percent, while the availability rate for all classes continued downward to end the quarter at 5.9 percent.
Given the lack of desirable industrial space available in the market, leasing activity of 5.49 million square feet decreased by 18 percent from Q2 2019 and eight percent from Q3 2018. In addition, net absorption declined 15 percent to 530,000 square feet from Q2 2019.
“Demand for quality industrial space in New Jersey remains very strong as more e-commerce and last-mile logistics companies look to either expand or relocate their operations in the state,” said William Waxman, executive vice president, CBRE. “Unfortunately, demand has once again outstripped supply. More new construction is needed to keep up with the demand that shows no signs of abating.”
The fundamentals driving the demand for industrial space in New Jersey remain strong. The continued growth of e-commerce sales, which according to the most recent Census Bureau data increased from 9.8 percent of overall national retail sales in Q2 2018 to 10.7 percent in Q3 2019, fuels the ever-expanding demand for warehouse space among large e-commerce companies, especially in locations near large population centers like New York City and northern New Jersey.
Major leases in New Jersey during Q3 2019 included a 1.15 million square foot renewal by Barnes & Noble at 1 Barnes & Noble Way in Monroe Township and a 977,616 square foot new lease with The Home Depot at 225 Elm St. in Perth Amboy.
On the investment sales front, overall industrial sales increased slightly by three transactions and almost 300,000 square feet compared to Q2 2019. Notably, the biggest difference between the two quarters was in the type of buyer. The confluence of demand for large blocks of space and a deep supply of cheap capital attracted more investor and institutional interest into the New Jersey industrial sales market and has crowded out owner-users.
New construction activity at the end of Q3 2019 totaled 21 buildings and 8.37 million square feet.
New construction starts as of Q3 2019 stand at five buildings and 2.63 million square feet. These new projects are all located in Central New Jersey, with three buildings and 1.93 million square feet in the Route 287/Exit 10 submarket.
Completions in Q3 2019 totaled more than 989,000 square feet, comprised of four buildings with almost 839,000 square feet pre-leased. Approximately 150,000 square feet in two buildings was completed in northern New Jersey in Q3 2019.