Thursday, July 7, 2016

Strong NJ Industrial CRE Demand Pushes Vacancy To 5% Level

by Steve Lubetkin,
Industrial leasing activity in Northern and Central New Jersey in the first half of 2016 remained significantly above historic levels, particularly at class A properties, pushing overall vacancy rates down to five percent in the second quarter of the year.

Net absorption at midyear reached 5.2 million square feet, putting 2016 on track to be one of the best for New Jersey’s industrial leasing.

“New demand for large class A spaces continued to be driven by e-commerce and last-mile delivery companies. In particular, Amazon, FedEx and UPS have been vigorously leasing space in the first half of 2016. FedEx and UPS alone leased a combined 1.5 million square feet this year, with most of those transactions expansions within the market and new requirements.”

Tenant activity was particularly strong within the Exit 8A submarket, where 3.5 million square feet of leasing activity was recorded this quarter, accounting for 38.8% of total leasing activity for Central New Jersey. Noteworthy transactions signed at midyear 2016 include Wayfair leasing 1.24 million square feet at 48-50 Station Road in Cranbury, and NJ-Cal Warehouse Expediters signing for 324,340 square feet at 26 Engelhard Avenue in Monroe.

Average asking rental rates continue to accelerate for all industrial asset classes. Rates have increased 19.3 percent since 2012 and are now less than one percent below the historical high of $6.30 per square foot.

Construction activity continued at an elevated rate in the second quarter of 2016, with 14 projects, totaling 2.3 million square feet, underway. With several developers considering breaking ground on 1.0 million square feet of speculative projects, construction activity is expected to remain elevated during the next 12 months.

“We anticipate new deliveries will reach 4.5 million square feet by year-end 2016, making it the second-best year for new construction this cycle — just behind 2014, when more than 8.0 million square feet of new construction was recorded."

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