1065 Cranbury South River Road in South Brunswick — file photo
By Joshua Burd
Industrial tenants leased about 5.5 million square feet in northern and central New Jersey during the second quarter, a new report finds, as vacancy continues to drop to historic lows.
The new market report by Cushman & Wakefield said deals in the 100,000- to 300,000-square-foot range fueled demand over the past three months, accounting for nearly one-third of the all Q2 leasing activity. The transactions pushed year-to-date leasing to 11.9 million square feet, which is behind last year’s midyear total but due in part to a lack of existing modern warehouse space.
The three largest commitments of the quarter included Clutter.com’s 449,890-square-foot lease at 1065 Cranbury South River Road in South Brunswick, One Stop Logistics’ 369,294-square-foot lease at 83 Stults Road in South Brunswick and clothing manufacturer FREEZE’s sale-leaseback of its 318,389-square-foot facility at 473 Ridge Road in Dayton.
“In sum, tenants absorbed 3.7 million square feet of industrial space in New Jersey during the second quarter, bringing year-to-date net occupancy gains to 7.5 million square feet,” said Andrew Judd, Cushman & Wakefield’s New Jersey market leader. “This trails only the 2016 mid-year record aggregate in terms of recent historical absorption.”
The firm said the northern and central New Jersey industrial market remains on a positive track despite a scarcity of existing space. Year over year, industrial vacancy has dropped to a historically low 3.3 percent, from 4.5 percent, including a 30-basis-point drop over the past three months alone.
“Space options have become limited for larger warehouse tenants,” said Jason Price, director of Cushman & Wakefield’s tristate suburbs research. “Yet while this has dampened new leasing somewhat, renewal activity surged to 3.4 million square feet during the second quarter.”
In fact, Price said, 15 tenants renewed leases larger than 100,000 square feet, marking a 61.9 percent quarter-over-quarter increase.
The tightening market pushed industrial asking rents higher by 2.8 percent during Q2, to $8.44 per square foot, C&W said. Meanwhile, asking rents for Class A warehouse space are priced at almost a 10 percent premium over the state’s market average.
Nearly 5.5 million square feet of new industrial space has been delivered so far in 2018, of which 79.2 percent has been leased, the firm found. Significant second-quarter construction deliveries included Wayfair’s 1.3 million-square-foot facility in Cranbury and Best Buy’s 725,400-square-foot warehouse in Piscataway.
Another 6.5 million square feet is currently under development, nearly half of which has been preleased.
“The majority of the sites under construction in New Jersey are slated to deliver in the second half of 2018, which should push the annual completions total to a new historic high,” Price said. “The Upper 287 Corridor, Port Region and Exit 8A are all expected to see new developments break ground in the immediate future, as the need for Class A warehouse space continues unabated.”