By Joshua Burd
Industrial leasing in New Jersey saw a sizable uptick in the first quarter, thanks in large part to new construction and continued demand from e-commerce and logistics users.
A new market report by Cushman & Wakefield found that Q1 leasing volume, which totaled 7.6 million square feet in northern and central New Jersey, increased 19.4 percent year over year. Developers in the region have delivered seven industrial buildings with more than 2.5 million square feet year to date, the firm found, while more than 54 percent of that space has been preleased and only three buildings are fully available.
C&W also noted that another 5.7 million square feet of space is currently under construction, more than half of which has been preleased.
“Existing Class A industrial opportunities remain scarce, and many tenants are opting for new development,” said Jason Price, the firm’s tristate suburbs research director. “In fact, proposed and under construction warehouse sites accounted for 43 percent of the first-quarter leasing total.”
Industrial vacancy in northern and central New Jersey was 3.5 percent through Q1, the report found, noting that newly completed speculative projects have contributed to a slight rise. C&W also said big-box demand has continued “unabated” to start the year.
“This uptick is expected to be brief as tenant interest for these primary Class A spaces remains healthy,” Price added. “In fact, we project occupancy and utilization to remain at historically high levels as demand for Class A product remains strong in the core submarkets along the New Jersey Turnpike.”
Meantime, e-commerce and third-party logistics tenants are still leading the market, the report found. The sectors accounted for four of the six industrial deals over 200,000 square feet in Q1, three of which occurred in the Exit 8A submarket as part of more than 2.5 million square feet of new leasing activity.
Price also said industrial rents continued to grow during the first quarter, rising 6.9 percent year over year to $8.78 per square foot. Asking rents have surged by more than 35 percent since the close of 2015, reaching historic highs over the past year.
“As e-commerce sales growth persists, the industrial market should stay on its current trajectory in the near term,” Price said. “Despite debates about late cycle stage, and concerns about global growth slowdowns, the desire for same-day and next-day delivery in infill markets like New Jersey continue to drive strong demand.”