By Joshua Burd
Home Depot has leased nearly 1.3 million square feet of newly built industrial space in Monroe, in a sign of continued market demand despite a shrinking appetite by e-commerce users.
A report by Savills, which highlighted the deal at 904 Cranbury South River Road, noted that tenants from other industries have picked up the slack in New Jersey as growth slows in the online retail sector and as brick-and-mortar sales have accelerated. That’s also evident in a recent deal by United Distribution, a logistics company, which took 384,895 square feet at a recently completed facility in Hamilton.
The transactions marked New Jersey’s largest new industrial leases of the fourth quarter, Savills found, while reporting that the region saw its “first substantial increase in vacancy” in more than five years. While still near historic lows, vacancy jumped 60 basis points from the third quarter, to 3 percent, amid “a return to market normalcy” after a historic run.
“In the near term, rent growth is expected to slow as vacancy increases,” Savills wrote in its Q4 report. “A robust labor force, the busiest port on the East Coast and quick access to I-95 and I-80 will maintain the interest of occupiers.
“In an increasingly gloomy economic outlook, a reminder of where the market has been is healthy. At the onset of the Great Recession, vacancy was about 8 percent, and trough to peak was a 250 (basis point) climb. The market today is well suited to absorb a similar scenario.”
Home Depot will occupy 1.28 million square feet at 904 Cranbury South River Road, a speculative project by Brookfield, which lists JLL’s Joel Lubin, Gary Politi and Ryan Milanaik as its leasing team. It was one of two Q4 deals by the home improvement giant, whose HD Supply affiliate signed a full-building, 195,723-square-foot lease with Delta Equity Management at 71 New Hook Access Road in Bayonne.
Meantime, United Distribution is taking space at 1365 Lamberton Road under a deal with Hilco, which recently completed its HRP Mercer Logistics Park off New Jersey Turnpike Exit 7A, according to Savills. The other top Q4 deals include a 469,933-square-foot renewal between Greek Development and GXO Logistics, at 2349-2353 Route 130 in South Brunswick, and Accem Warehouse’s 293,887-square-foot lease with USAA Real Estate and Blue Water Property Group, at 8 Peach Tree Hill Road in Livingston.
The Savills report also noted that, despite an uptick in vacancy and slowing rent growth, North Jersey is still supply-constrained with high land costs. That points to continued success for industrial developers, especially with continuing demand for top-tier, port-centric options.
Northern and central New Jersey had about 17 million square feet of industrial space under construction at year-end, the report said.
“Even as congestion on the West Coast has begun to normalize, users have cited their lack of appetite for the volatility experienced at the height of the congestion issues,” the Savills research team wrote. “To diversify their risk, having options on either coast to navigate future delays benefits both the user and market fundamentals in the long term.”