By Joshua Burd
Newly built speculative industrial space in northern New Jersey is leasing in less than two months on average, in the latest sign of the market’s ongoing supply and demand imbalance.
That’s according to a new report by Newmark, which surveyed 23 major U.S. markets where developers are racing to keep up with tenant requirements. North Jersey ranked sixth in 2021 in terms of average duration between warehouse delivery and stabilization, with new buildings leasing in less than half of a quarter, in a market with 3.1 percent vacancy at year-end.
By comparison, the region’s average spec lease-up period from 2015 to 2020 was just under a quarter and a half, Newmark found. Across the nearly two dozen markets surveyed, average lease-up time fell to less than a single quarter in 2021, down from 3.9 quarters in 2015.
“Demand for modern warehouse space to improve supply chain efficiency and meet evolving consumption habits has never been higher, particularly from third-party logistics, consumer goods and e-commerce companies, which represented the majority of new-construction leasing,” Newmark’s Lisa DeNight and Eric Messer wrote in the report. “Developers are attuned to occupier needs and design specs for new warehouses are quite uniform across the country: new speculative construction offers tenants with immediate-occupancy requirements the agility to move in swiftly, contributing to quicker leasing decisions.”
The report also noted that some landlords of newly delivered properties are delaying leasing decisions to achieve the highest and most current rents, as rates grow by the month in markets that are especially tight, including New Jersey. Yet speculative construction deliveries fell significantly in 2021, Newmark found, with developers citing pandemic-related labor disruptions, sourcing materials, lengthening entitlement periods and community pushback to warehouse development as the primary causes.
Developers are seemingly trying to make up for lost time. According to the research, the construction pipeline in the 23 markets rose to 500 million square feet underway in Q4 2021, the most on record, with speculative warehouses accounting for some 77 percent of that volume, in line with the five-year average share.
“As disruption to construction timelines subsides and speculative deliveries increase, experts expect the average lease-up period to gradually lengthen over the next few years as tenants are presented with more options,” the report said. “Tenants with move-in requirements this year will face a continuing environment of scarcity and competition in most markets, as supply chain and labor challenges persistently impact delivery timelines.”
