Pre-leasing rates of 89.3 percent on 2017 deliveries prompt developers to put shovels in the ground at record levels. 2 million square feet forecast for delivery in 2018 surpasses anything seen this cycle.
The year of construction for buildings has significant impact on reported vacancy rate. Buildings completed since 2010 maintained the lowest vacancy rates, as office occupiers prefer new product. Demand for new construction will drive the demolition/rehabilitation of older, vacant office buildings, especially in strategically located markets lacking sites for new construction.
Twelve leases greater than 500,000 square feet closed throughout northern and central New Jersey, an increase of 33.3 percent year-over-year and a pace expected to outpace year-end totals for 2016. Big-box leasing has tripled as traditional retailers and e-commerce companies —representing 75.0 percent of big-box leasing for 2017 — continued to expand their distribution networks.
The proliferation of e-commerce and its labor-intensive fulfillment centers contributed to a 97.0 percent compounded annual growth rate in the number of job postings for distribution-related jobs since 2011.
Leases in the 10,000-25,000-square- foot range accounted for more than one-half of signed deals in the Northern and Central New Jersey office market.
Northern and Central New Jersey have seen industrial asking rent growth of 11.5 percent year-over-year. The Exit 10 submarket increased 17.8 percent year-over-year, driven by an increase of Class A space with asking rents as high as $9.25 per square foot.
Over the last three months, New Jersey’s industrial market recorded nearly 10.0 million square feet of leasing activity, with big-box markets like Southern New Jersey and Exit 8A seeing a flurry of activity.
Persistent demand and limited construction is driving rent growth for New Jersey’s transit hub markets, while rents are expected to trend higher as tenant demand is projected to outpace the 456,000 square feet of new Newark supply slated for delivery in 2018.