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Industrial continues to tighten in Q3, NAI Hanson, CBRE report

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A chart on northern and central NJ average asking rate vs. vacant available rate.
A chart on northern and central NJ average asking rate vs. vacant available rate. - ()

The northern and central New Jersey industrial submarkets continued to see an increase in leasing velocity and sales volume in Q3, commercial real estate firm NAI James E. Hanson reported in its Q3 northern and central New Jersey Industrial Market Report.

Demand for both regions, the firm reported, drove vacancy from 4.5 percent to 4.2 percent from Q2 to Q3, with over 6.4 million square feet leased in Q3 alone and an increase in sales volume to $573 million.

Average sale prices, the firm reported, have continued to increase year-over-year to $81.66-per-square-foot from last year’s Q3 $55.00-per-square-foot.

Similarly, NAI Hanson reported asking rents increased on average $1.02-per-square-foot year-over-year to $7.45-per-square-foot.

“As the costs to enter into New Jersey’s most easterly markets continue to increase, we are seeing a continued western and southern shift in demand and, subsequently, investment,” said Scott Perkins, senior vice president and chairman of NAI Hanson’s Industrial Council. “Developers continue to see better opportunities for return on their investments along the corridors of New Jersey’s main highway arteries. This shift aligns with the continued search for budget-friendly and accessible spaces beyond the pricier Meadowlands markets, particularly in the Essex, Morris, Sussex and Warren markets. Our industrial team at NAI James E. Hanson looks forward to continuing to leverage our decades of experience in each of these emerging industrial markets on behalf of our clients into the fourth quarter and beyond.”

The port submarkets saw an increase of $1.02-per-square-foot from last quarter and $1.62-per-square-foot year-over-year.

The Exit 8A, and 10 and 12 submarkets on the New Jersey Turnpike recorded the lowest vacancy rates at 2.1 percent and 3.9 percent respectively.

CBRE said deliveries from 2007 to 2017 Q3 increased the total market inventory by 5 percent with more than 37 million square feet having been delivered. The firm said 7.9 million square feet in 24 active construction projects are in the works. And of that 7.9 million, 60 percent of the space has already been committed.

CBRE said availability in all of New Jersey’s industrial stock has decreased for seven consecutive years, dropping 520 basis points from 12 percent in 2010 to 6.8 percent. The firm reported that since 2012, demand and the compression in availability has driven rents to reach the pre-recession high of $6.23-per-square-foot in Q4 2016 and to reach $6.64-per-square-foot in Q3 2017.

“The market looks to remain tight into 2018, with rents expected to stay at or near current levels for legacy product, and continuing to escalate for newer product,” CBRE said in its NJ Market Flash. “The delivery of new space will have little impact on the overall availability rate, which should inspire additional development to proceed into construction in the coming year.”

Among the largest transactions for Q3 2017, NAI Hanson listed Wayfair’s 1.3 million-square-foot lease in Cranbury and Amazon’s 598,000-square-foot lease in Robbinsville.

For the quarter, NAI Hanson reported Blackstone Real Estate Income Trust $74 million purchase of Prologis’ 11 properties in Fairfield that totaled 570,102 square feet to be the largest sales.

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Mario Marroquin

Mario Marroquin

Mario Marroquin covers real estate. A native of El Salvador, Mario is bilingual in English and Spanish. He graduated from Penn State University and worked in Pennsylvania before moving to New Jersey. His email is mariom@njbiz.com.

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