E-commerce and logistics continued to drive the industrial market in New Jersey to century highs during the third quarter, according to Cushman & Wakefield.
Despite new deliveries, overall vacancy closed the quarter 40 basis points lower at 4.1 percent from Q2, while asking rents continued to increase, the firm reported.
“Barring any major geopolitical disruptions or events, this current robust expansion cycle in the New Jersey industrial market is anticipated to continue into the near future as the national economy remains healthy,” Andrew Judd, Cushman & Wakefield’s New Jersey market leader, said. “As online sales steadily grow, the need for both e-commerce and logistics companies to locate near mass populous regions remains important.
“As a result, New Jersey is poised for further growth, due in part to its ideal location near New York City and Philadelphia, and as a key port of entry for imports. Asking rents should continue to rise, even as Class A space leases up, while developers will continue to build in the core submarkets as demand persists and vacancy remains at or near historical levels.”
Cushman & Wakefield said pre-leasing activity in Q3 accounted for 37 percent of the total square footage leased, while vacancy dropped 30 basis point to an all-time low of 3.9 percent.
And for the 19th consecutive quarter of occupancy gains, Q3 saw the market’s overall net absorption totaling 3.2 million square feet.
“Some 9.2 million square feet of net absorption has been recorded through the first nine months of the year, putting the New Jersey industrial market well on pace to finish with more than 10 million square feet of absorption for the fourth straight year,” Cushman & Wakefield said in a news release. “Year-to-date, every major submarket along the N.J. Turnpike has posted positive net absorption. However, Exit 8A remains the top performer in that regards with 3.9 million square feet, accounting for 47 percent of total New Jersey warehouse absorption this year.”
Exit 8A and upper Interstate 287 saw a decline in vacancy by 180 and 100 basis points, respectively. Vacancy at Exit 8A now stands at 1.8 percent and at 2.6 percent in the upper 287 corridor.
On the other hand, Cushman & Wakefield reporter the vacancy in the lower 287 submarket to tick 150 basis points higher to 5.0 percent.
In Q3, New Jersey saw 3.9 million square feet of new construction begin, the firm said. As of the third quarter, 9.6 million square feet of industrial product is under construction with 53.7 percent of those 9.6 million square feet having been leased already.
“The overall industrial direct rental rate for northern and central New Jersey ticked higher to $7.66 per-square-foot, remaining close to last year’s historic high ($7.75 per-square-foot),” Cushman & Wakefield said in a news release. “Within warehouse and distribution space, the average direct rate ($7.24 per-square-foot) is up 9.4 percent year-over-year, hitting a century-high mark.
“The Meadowlands’ rate continued to surge, increasing another 5.3 percent during the quarter to $8.69 per-square-foot (an all-time high). Meanwhile, both the Lower 287 Corridor and Exit 8A experienced further rises in asking rents, also reaching historical levels, at $7.06 per-square-foot and $6.50 per-square-foot, respectively.”