It was another good quarter for the industrial real estate market in northern and central New Jersey, according to Cushman & Wakefield, but with one caveat.The real estate services firm’s report on market activity in the third quarter found that e-commerce and growth in the logistics industry fueled demand for properties. But, the firm said, demand did not quite reach the highs seen in the year’s first two quarters, probably because of a lack of available quality product.
On the upside, C&W did say leasing is likely to remain strong for the rest of the year. Likewise, net absorption should finish positive, even factoring in the strong construction pipeline in the state.
“The need for modern and quality warehouse space, particularly along the New Jersey Turnpike, should offset much of the construction deliveries and dispositions in the near future,” Andrew Judd, C&W’s New Jersey market leader, said in a prepared statement. “The northern and central New Jersey warehouse market is in no immediate danger of becoming overbuilt. As a result, asking rents will climb steadily as market conditions tighten and landlords remain in the driver’s seat, with full-year leasing on pace to reach its highest total since 2000.”
C&W said overall net absorption reached 13.2 million square feet for the year, which is a new annual high, with one quarter still remaining in the year. Meanwhile, vacancy for warehouse space ticked down to 4.5 percent, while the total development pipeline grew to 7.9 million square feet as 1.2 million square feet of industrial product was completed during the quarter and another 1.6 million square feet broke ground.
The industrial market did fail to absorb space at the same pace as previous quarters, C&W said, but it registered 1.9 million square feet of occupancy gains in Q3, mostly in the central New Jersey submarkets.
Overall industrial vacancy was flat at 5 percent.
Average asking rents rose to $7.47 per square foot, representing 16.4 percent growth from the year earlier. For warehouse space, the average asking rent rose to $6.62 per square foot.
Leasing activity was also strong, with more than 6.7 million square feet of new leases signed during the quarter. That brought the year-to-date total to 23.5 million square feet, representing year-over-year growth of 24 percent. If the pace holds through Q4, the market would reach its highest annual total for new leases in 16 years.
“Third quarter lacked some of the larger transactions (of 400,000-plus square feet) that were prevalent in the first half of the year due to the decline of available space,” Jason Price, C&W research director for the tri-state suburbs, said in a statement. “However, (third-party logistics companies) continued to lease up rapidly along the New Jersey Turnpike in response to e-commerce demands.”
Mid-range leases of 100,000 to 300,000 square feet led the way in Q3, Price added, representing more than half of the quarter’s volume.
Some of the largest leases signed in the quarter included:
- FedEx (pre-lease), 340,000 square feet, Route 130, Hamilton;
- Creative Logistics, 281,000 square feet, Bridge Point Turnpike 8A, South Brunswick;
- CDS, 250,000 square feet, 301 Middlesex Center Blvd., South Brunswick.
