Wednesday, July 10, 2024

Industrial Vacancy Rate Hits Highest Level Since 2017 in New Jersey Capital

By Mateusz Wnek CoStar Analytics 

The Trenton, New Jersey, metropolitan area posted an average vacancy rate of 4.2% between 2021 and 2023, as newly completed logistics space was easily filled amid the pandemic. Lately, a significant supply-demand imbalance has pushed the measure to 7.7% as of July, the highest reading since the second quarter of 2017.

Tenants who overcommitted to space beyond their long-term needs, such as third-party distributors, have recently been recalibrating their footprints. Markets such as Trenton, Northern New Jersey, and New York have all seen negative absorption, or change in occupied space, totaling at least negative 1 million square feet over the past year.

Across the Trenton area, the second quarter of 2024 culminated in the weakest quarterly showing for industrial space demand since the last three months of 2014. The period also capped 12 months of net absorption totaling a negative 1.1 million square feet.

Ongoing space expansion has added to the headwinds for existing industrial owners. The past year saw 1 million square feet finished across eight projects led by the Lawrence Logistics Center. The nearly 262,000-square-foot warehouse and light manufacturing facility opened its doors in December and is still unoccupied, asking $13.95 per square foot, triple-net.

Amid the supply additions, Trenton’s total industrial space now totals roughly 44.5 million square feet, representing an increase of 2.3% from last year. Properties are mostly concentrated in Trenton, Robbinsville and Hamilton, with the largest clusters situated primarily along routes 1, 130 and 206.

Digging deeper, Hamilton has led the metropolitan area in move-ins and move-outs over the past year. However, move-out activity has far outpaced the amount of space occupied, resulting in a net absorption total during the past 12 months of negative 657,000 square feet. Other notable weak spots were Ewing (-227,000 square feet) and Lawrenceville (-207,000 square feet).

The absence of a demand catalyst has recently weighed on leasing activity across Trenton. For the 12 months through June, leasing volume has decelerated sharply to just 470,000 square feet, down from 3.1 million square feet in the comparable period last year. Accordingly, move-in totals will be limited through early 2025, resulting in average vacancy hovering well above 7% in the near term.

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