By Joshua Burd
Rents for warehouse and logistics space continue to climb across much of New Jersey, where landlords saw a first-quarter uptick in leasing activity after a momentary lull in late 2021.
According to market researchers, the start of 2022 has reinforced the ongoing demand for industrial space and the sheer lack of available inventory in the state. The imbalance comes despite a robust construction pipeline from developers that is still not keeping pace with tenant requirements.
As such, a report by Colliers found that asking rents in northern and central New Jersey averaged $12.16 per square foot during Q1, down slightly from late last year but up 21 percent year over year. Rates in central New Jersey saw a sizable jump to start the year, to $12.53 per square foot, up from $11.94 in the previous quarter and from $9.40 in Q1 of 2021.
“New Jersey’s industrial market continued to show remarkable market fundamentals and robust leasing volume amid supply constraints,” Colliers wrote in its first quarter market report. The research noted that, while availability continued to sit at all-time lows, leasing activity increased 48.2 percent quarter over quarter, to 11 million square feet, and was evenly distributed between northern and central New Jersey.
“Activity this quarter was driven by manufacturing users and logistics companies, which accounted for half of the leasing volume,” the firm wrote, including Keurig’s 499,898-square-foot commitment at 24 Applegate Drive in Robbinsville and ZT Group International’s 425,000-square-foot lease at 1 Emerson Lane in Secaucus.
A separate report by Cushman & Wakefield found that vacancy for warehouse space in northern and central New Jersey remained flat at 1.8 percent, an all-time low, as some lower-quality space went on the market, offsetting the strong demand totals. Yet Class A space remained scarce, with vacancy reaching 0.4 percent by the end of Q1.
C&W also noted that total leasing volume for industrial space more than doubled from Q4 of 2021. The firm’s research tracked more than 6.8 million square feet of leasing activity in the quarter, including 1.6 million square feet in the Meadowlands, 950,000 square feet in the lower Interstate 287 corridor and 850,000 square feet around Port Newark-Elizabeth.
“Despite a short lull in leasing activity, we’ve seen high demand in all our markets — with logistics and ecommerce continuing to be the most significant driver,” said Jason Price, a senior research director for Cushman & Wakefield’s U.S. industrial and logistics team.
Price added that, amid widespread growth in pricing, the lower I-287 corridor yielded the most substantial quarterly increase in average asking rents at 27.6 percent.
“With elevated levels of demand, supply chain issues and record-high levels for occupancies, landlords continued to push asking rents for warehouse and distribution space to new heights,” he said.
Additionally, with virtually no existing Class A warehouse options throughout the marketplace, C&W said developers continued to build at a feverish pace in Q1. More than 11 million square feet of space is currently under development, much of it on a speculative basis but drawing broad interest from tenants in need for space along the New Jersey Turnpike.
For its part, Colliers said strong preleasing activity in recently delivered product drove net absorption during the quarter, with tenants occupying 72.3 percent of around 2.4 million square feet of newly developed space. To that end, a new 873,743-square-foot warehouse at 173-268 Doremus Ave. in Newark which was preleased to FedEx.
