Warehouse rent is going up across the nation, but according to a recent report from CBRE, it’s going up the most in New Jersey.
According to to the commercial real estate services and investment firm, double-digit rent increases are on the horizon for many warehouse users, whether they are renewing agreements or moving to a new space. At a 64% uptick, Central Jersey has the highest increase in the U.S., while North Jersey has an increase of 40%.
Following closely behind Central Jersey in the report were California’s Inland Empire and Philadelphia, both with 62% increases.
“Industrial occupiers’ options are more limited at lease expiration, with most faced with paying a significant increase in rent for the same space,” said CBRE Executive Managing Director and Industrial & Logistics Leader John Morris. “With vacancy so tight, we will continue to see this trend in rents in the near term.”
Industrial and logistics leases typically span five – some 10 – years and see a 3% annual rent increase. But, with the sector’s current demand, tenants that signed on five years ago are now seeing an average 25% higher rate for rent as those agreements expire.
Moving to a new space presents its own difficulties, as historically low vacancy rates affect the sector. According to CBRE, that number stands at 3.6% nationwide. In New Jersey, according to JLL’s Q3 Industrial Outlook, that number is even tighter, with Class-A industrial availability at 0.2%.
Morris added that many tenants are willing to pay the higher rates, due to the circumstances.
“More construction deliveries could help ease the situation in 2022,” he said. “Some occupiers, particularly retailers, will start to pass these costs along to consumers.”
According to CBRE, the current triple-net asking rent in Central Jersey is $9.57; in North Jersey it’s $9.91.
Looking for lab space
But logistics isn’t the only sector seeing a shortage of space. According to CBRE’s U.S. Life Sciences Trends 2021 report, demand for lab space – up more than 8% over the past six months – is way ahead of speculative construction in the Garden State.
“New Jersey is a hotbed for the life sciences sector with strong VC funding, record job growth and demand for lab space outpacing supply by a large margin,” said Senior Vice President Thomas Sullivan. “Given New Jersey’s position as one of the country’s top markets for R&D employment growth over the past year, demand for space will remain extremely high and owners will have to adapt and create the type of properties needed to support this need.”
With 34% of it already pre-leased, according to CBRE there is only 222,500 square feet of lab and R&D space under construction here, with 17 tenants currently looking for approximately 1.3 million square feet of space.
Meanwhile, CBRE said that biomanufacturers are looking for approximately 800,000 square feet of space in the market.
And that means that net lease rate pricing for lab space is up by 10% to 15% since since mid-2020.
In New Jersey, CBRE said the largest lease commitment of the third quarter was Hikma Pharmaceuticals, which signed a deal for nearly 50,000 square feet at the Route 278/78 Interchange. Elsewhere, Beyond Spring Pharma signed a 27,813-square-foot lease in Morristown and Sensient signed on for 21,000 square feet in Somerset.
Overall, the firm said it experienced historic leasing in 2021, with a record-setting 750 million square feet in transactions through the third quarter.