Asking rents for industrial space in New Jersey continue to soar, according to real estate services firm Transwestern, thanks to “unabated” demand for high-end warehouse and distribution facilities around the state.In a new report, the firm said the average asking rents for industrial space in the second quarter surpassed the historic high set in Q1. For the first time in 15 years, the overall asking rent average is up more than 10 percent year over year, rising in Q2 to $6.33 per square feet, from $5.73 at the same point in 2015.
Researchers with Transwestern’s Parsippany office said e-commerce and third-party logistics firms spearheaded the demand, pushing vacancy down to 6.3 percent from 7.4 percent a year ago. That represents the lowest level in 15 years.
“With traditional retailers becoming players in the e-commerce market, the demand for industrial space in New Jersey continues to skyrocket,” Transwestern Managing Director Lori Zuck said in a prepared statement. “As a result, we’re beginning to see companies sign long-term leases in secondary markets. It almost feels like a bubble until one realizes that there’s minimal risk of overbuilding.”
In its second-quarter market report, Transwestern found that 2.2 million square feet of industrial space was absorbed in northern and central New Jersey. It was the fourth consecutive quarter that the market experienced more than 2 million square feet of net absorption, while absorption for the past four quarters totaled 9.5 million square feet.
Submarkets such as New Jersey Turnpike Exit 8A, Exit 10, Exit 12, the Hudson waterfront and the Meadowlands continued their strong performance from past quarters, the firm found. But tightening vacancies are pushing developers to consider speculative construction of smaller buildings in secondary markets.
According to Transwestern research, there is 4.4 million square feet of industrial product currently under construction in New Jersey.
Experts with the firm, meantime, said the high leasing activity is a reminder of the need to replenish the state’s stalled Transportation Trust Fund.
“Improving New Jersey’s transportation infrastructure is absolutely paramount to the future success of the state’s industrial market,” said Transwestern New Jersey Research Director Matthew Dolly. “Retailers want to reach the highest percentage of the population within the shortest amount of time, and the infrastructure challenges that we face could make the ‘last mile’ even more critical in terms of finding a location that helps to offset delivery costs.”