NAI James E. Hanson released its Second Quarter 2022 Industrial Report on July 1, and even though there may be uncertainty surrounding the overall economy, you won’t see it here.
Rising costs, including for construction and fuel, supply chain issues: that’s just not reflected in the numbers at all, NAI Hanson Vice President and Director of Research James Delmonte – the man behind the report – told NJBIZ.
Overall, vacancy rates are still low. While NAI Hanson reports an overall rate of 1.8% for northern and central New Jersey, at its lowest that number dips down to 0.3% in the well-connected Exit 8A submarket. And rents are still rising.
NAI Hanson negotiated the sale of a 26,112-square-foot industrial building in Carlstadt for $6 million. Southpeak Group purchased the property from SNS Rugs, and the NAI Hanson Management team was recently tapped to manage the site. >>
They’re at their highest in the Ports and Meadowlands submarkets, according to the report, which boast respective average asking rates of $16.55-per-square-foot and $16.40-per-square-foot. In the Ports, that price has gone up by more than $2 in the past year.
Last week, New Jersey’s Ports submarket was identified as one of the top five in the nation, so it should come as no surprise to see the impact of that demand. And while there was a considerable decrease in leasing volume in the submarket year over year – down by 2.27 million square feet – NAI Hanson points out that with a 1.9% vacancy rate, there just isn’t much left to lease. Even still, year-to-date total absorption nearly reached 1 million square feet at the end of Q2.
In the Meadowlands, the vacancy rate was the same as in the Ports, but the submarket saw a slight uptick in year-over-year leasing activity – by 32,621 square feet – for an approximate total of 365,000 square feet leased in Q2. Year to date, total net absorption was about half that of the Ports market, at 539,228 square feet.
Though space is tight, construction is ongoing in both the Ports and the Meadowlands. One of Q2’s biggest projects highlighted in the NAI Hanson report is Lincoln Equities Group’s 330,000-square-foot spec warehouse at Lincoln Logistics Bayonne, the former Military Ocean Terminal site. Work got underway in May and is expected to wrap up in the fourth quarter of 2022.
“Upon completion, these two state-of-the-art warehouse and distribution facilities will fulfill our vision of designing a modern portside distribution center that offers an unparalleled gateway to the entire East Coast Corridor via water, land and air,” Lincoln Equities Group President Joel Bergstein said at the time.
Moving away from the No. 1 and No. 2 submarkets, NAI Hanson reported that average asking rents were above $10 per-square-foot in every submarket with the exception of Exit 7A ($8.67) and Warren & Sussex ($7.44)—and Delmonte noted, for the latter in particular, it’ll take a while to top that $10 mark due to its location.
Warren & Sussex are quite a ways away from the activity – and accessibility – afforded in the Ports and Meadowlands markets, but Exit 7A doesn’t sit as far west, so it could be poised to absorb some of the overflow demand hitting the Exit 8A submarket, which posted the lowest vacancy rate across NAI Hanson’s North and Central Jersey coverage area in Q2.
At $14.13 per-square-foot, Exit 8A was No. 3 for average asking rents in Q2—a more than 32% increase year over year, according to NAI Hanson, and with just about 234,000 square feet of space available to lease. However, with 1.5 million square feet under construction it looks as if rising rents in the submarket could stand to stabilize upon delivery of the new product.
In June, a new 171,000-square-foot industrial building sold for $55.1 million, according to NAI Hanson. Fully leased by Amazon, CommercialEdge Information purchased the more than 16-acre site. >>
Activity in the neighboring Exit 7A submarket was much higher, ranking third for most square feet under construction in Q2, with nearly 3.5 million square feet at work. (The Ports, with approximately 4.6 million square feet under construction, and Exits 10/12, with almost 3.2 million square feet under construction, came in at Nos. 1 and 2, respectively; the Meadowlands was No. 4 with about 1.9 million square feet under construction.)
Average rents, meanwhile, are among the lowest in the North and Central Jersey submarkets in Exit 7A, for now at least – over the past three years, they’ve gone up by just over $3-per-square-foot – and the vacancy rate fell from 4.1% in the first quarter to 2.9% in Q2. Year to date, net absorption in Exit 7A is 926,861 square feet.
One of the quarter’s top sale transactions was located in the Exit 7A submarket: 539 Route 130 in Hamilton, an approximately 171,000-square-foot property that sold for $55.1 million. But, maybe don’t read too much into that. Among the other top three sales it’s hard to find anything that jumps out as banding the group together – they’re located in different submarkets, and represent a mix of new construction and existing properties.
Chimney Rock Road, Bridgewater
581,000 square feet | $110 million
329 New Brunswick Ave., Rahway
212,000 square feet | $62,000
539 Route 130, Hamilton
171,000 square feet | $55.1 million
100 Demarest Drive, Wayne
117,340 square feet | $27.5 million
According to Delmonte, that disparity is another indicator that “investor confidence is very high in the industrial market.”
Take a closer look at Q2 in the complete report, available here.c