Industrial tenants continued to flock to large, high-quality buildings in the Exit 8A and Exit 7A submarkets, according a first-quarter market report by Jones Lang LaSalle.
The two submarkets along the New Jersey Turnpike recorded 3 million square feet of lease signings in the first three months of the year, researchers at the firm’s Hasbrouck Heights office found. That includes about 2.1 million square feet in transactions in March alone.
“You’re going to see an extraordinary amount of absorption down there in the current quarter or the next quarter,” said Rob Kossar, the firm’s managing director. “And even the large bulk spaces that are available all have activity on them.”
While many other submarkets had tepid first-quarter activity, total available space in the 8A and 7A submarkets fell about 21.5 percent and 18 percent, respectively, according to the report. And, Kossar said, interest in the region’s large class A spaces has continued through April, adding that “most of them will be gone by the end of the quarter.”
The demand could create opportunity for class B and C buildings, while also paving the way for speculative development in the area, Kossar said. New construction has been more prominent in northern New Jersey since the recession, but “we see a lot of buildings in the pipeline” in the central part of the state.
“In 8A and 7A, nobody has stepped up yet and done the big announcement or the big groundbreaking, but there’s a lot of people talking about (speculative) buildings down there just to be first,” Kossar said. “It’s going to happen.”
Much of the new demand is being driven by consumer products companies that are finally gearing up for a long-awaited surge in consumption, said Alex Klatskin, general partner at Forsgate Industrial Partners. The firm, which owns 6 million square feet of industrial space in the 8A submarket, saw demand start to surge late last year.
Klatskin said tenants are finally ready to invest in large, newer space. That led the firm, in the fourth quarter, to have its best quarter in about six years, and activity has remained strong in early 2012, he said.
During the recession, “people only made real estate decisions to save money,” Klatskin said. “It’s the only reason they did something, and when you do that, it usually means taking less space. Today, they’re doing it because they’re trying to grow their businesses, and that usually means more space.”