By Joshua Burd
A lack of new supply in New Jersey’s industrial market led to a year-end slowdown in leasing — despite high demand — setting up another year of robust activity for newly built warehouse and logistics space.
Research by Colliers International shows that tenants continued to have difficulty finding industrial space in the fourth quarter of 2018. Leasing activity in northern and central New Jersey totaled just under 9.1 million square feet in the final three months, down from 10.6 million square feet in the third quarter and 13.2 million square feet in the fourth quarter of 2017.
Colliers cited the market’s ever-shrinking availability rate, which ended the year at 5.8 percent in northern New Jersey and 3.9 percent in central New Jersey. Rental rates in the regions had grown by year-end to $8.40 per square foot and $7.68 per square foot, respectively.
That lack of inventory was especially pronounced for those seeking big-box space, Colliers found. The firm tracked four leases in excess of 250,000 square feet that were completed during Q4, down from eight in Q3 and 11 such deals a year earlier.
“We saw a ton of interest in industrial as the year came to an end, with average asking rent reaching record highs,” said Dennis Waggner, executive managing director and New Jersey market leader for Colliers. “Demand for Class A product continued to rise as space became limited, posing an issue for brokers.
“Whether or not the two continue to diverge is definitely something to look out for in 2019.”
The report noted that the market saw 1.5 million square feet of positive net absorption in Q4, thanks to the delivery of 737,000 square feet of new space during the period. All of those projects had preleasing commitments.
In North Jersey, the market saw 2 million square feet of net absorption to end the year, Colliers found. With availability falling further, developers accelerated their construction pipelines, leading to 14 projects totaling 5.4 million square feet under construction.
The largest among them is Bridge Point 78, a sprawling development in Warren County, where Bridge Development Partners has started on roughly half of a planned 4 million square feet.
Modern options were especially limited in Central Jersey, which saw 546,176 square feet of negative net absorption in the final three months of 2018, Colliers said. That figure marks the lowest net absorption total in the region since the third quarter of 2009, meaning new deliveries will be especially welcome.
“Although it seems ominous, a 23-quarter streak of positive net absorption in Central New Jersey’s industrial market being broken in the end of 2018 may be a sign of good things to come,” said John Obeid, senior director of tristate suburban research for Colliers. “This new space opening up should fuel a fast start to 2019 as supply comes to meet demand.”
Central Jersey was home to the largest lease of Q4, a 547,334-square-foot renewal and expansion at 1665 Jersey Ave. in North Brunswick by Pioneer Commodities.