Northern New Jersey topped the nation in rental growth for industrial and logistics properties as tight vacancies and high demand spark bidding wars for industrial space across the U.S., driving both asking and taking rent growth to new highs, according to a new report from CBRE.
Coastal markets and the Northeast dominated the top growth list with first-year base rents in northern New Jersey up by 33.3% year over year through May–the largest increase in the country. Philadelphia was third at 19.7% and Central New Jersey ranked ninth at 13.9% growth.
Asking rents – the listed rates that landlords are offering for space – nationwide increased a record 8.3% year over year in the fourth quarter of 2020 and 7.1% in the first quarter of 2021—well above the five-year annual growth average of 6.8%.
Meanwhile, “taking rents” – first-year base rents on industrial leases of 12 months or more – increased 9.7% year over year for the first five months of 2021. Bulk warehouses accounted for the biggest increases in taking rents. Specifically, leases for warehouses of 500,000 square feet or more surged 13.2%, while leases for facilities between 100,000 square feet and 499,999 square feet rose 11.6%.
“Northern New Jersey has one of the lowest industrial vacancy rates in the country at just 2.2%, and occupiers are willing to pay more than landlords are asking as they struggle to find available space,” said Thomas Monahan, vice chairman at CBRE, in a prepared statement. “Demand for new space is incredibly high and bidding wars for what is available has created a challenge for many occupiers looking to expand or simply renew.”
The trend is playing out across the country, but particularly in coastal markets and high population centers.
With continued near-record low vacancy rates, taking rent growth will outpace asking rent growth for the foreseeable future. Consequently, taking rents will remain a better gauge of the market’s strength than more traditional metrics.