Propelled by a strong fourth quarter, leasing in New Jersey’s industrial real estate market reached its highest mark in seven years in 2011, according to a new CB Richard Ellis market report.
The momentum could be a sign that industrial tenants and prospective buyers are “getting off the fence” after about two years, realizing that the market is “heading toward equilibrium,” said William Waxman, CBRE executive vice president.
“We’re done bumping along the bottom, and now the upward climb is starting again,” Waxman said. “I think everyone has realized that and said, ‘Oh dear, if I don’t do something now, in six months or a year, it’s going to be more expensive.'”
Leasing velocity for the year rose to 25.78 million square feet, a 35 percent jump from 2010, according to CBRE’s fourth-quarter industrial market report. For the quarter, landlords leased 5.77 million square feet of space in northern and central New Jersey.
CBRE executives say the leasing volume and investor interest are among several “encouraging signs pointing toward imminent recovery.” The region’s industrial market also recorded 14.51 million square feet of new sales activity in 2011, growing 37 percent from 2010 and doubling 2009 totals.
Putting money back into industrial buildings has helped drive activity for Elizabeth-based Avidan Management, which recorded nearly 300,000 square feet of lease signings in 2011. Josh Avidan, a member of the firm’s senior leadership team, said improvements are becoming more important as tenants develop “very tight criteria of what they’re looking for,” including functions that are specific to their business and energy-efficient features.
“People are aware that lighting can be a low-hanging fruit when it comes to energy savings,” Avidan said. “So when people come to your building and see inefficient lighting, I think right away that’s a turnoff, and might be a tell sign that landlords and owners are not putting the right money back into the building.”
Mindy Lissener, CBRE executive vice president, said vacancy rates in class A buildings have gone down, as tenants “have traded up for the same or lower lease rates.” That could lead to a disconnect between property types, she said, as there will be “upward pressure on lease rates in class A buildings, and then maybe some downward pressure on lease rates in class B buildings, depending on which market you’re in.”
More than 10.5 million square feet of positive absorption in 2011 was driven by central New Jersey, which absorbed some 9.7 million square feet for the year, the report said. A 751,000-square feet lease by LG Electronics USA and a 1.7-million-square-foot acquisition by KTR Capital Partners, both in South Brunswick, highlighted fourth-quarter industrial activity.
Waxman said North Jersey was active, but on a smaller scale, because of the size and age of its buildings, along with the lack of available land and cost of new construction.