By Joshua Burd
Vacancy in New Jersey’s booming industrial market has ticked upward, thanks to a flurry of new construction and a return to what experts describe as normalized demand levels.
New research finds that northern and central New Jersey recorded roughly 2 million square feet of negative net absorption in the second quarter, referring to the decrease in overall occupied space in the market. That came as warehouse tenants leased nearly 5 million square feet during the three-month period, with asking rents still rising despite the pullback in some areas.
“Following unprecedented, historic growth over the past few years, demand in New Jersey’s industrial market has normalized to pre-pandemic levels,” said John Obeid, Cushman & Wakefield’s senior research manager for the New Jersey region. “However, leasing activity in certain submarkets throughout New Jersey rose over the past few months, with central New Jersey being a large demand driver over this quarter. Additionally, average asking rents increased over the quarter, which can be attributed to new Class A deliveries priced above market average.”
Central New Jersey led the market in Q2 with 3.2 million square feet of leasing activity, according to Cushman, accounting for 67.1 percent of the total volume. That included an 886,826-square-foot lease by LVMH, the luxury goods giant, at 258 Prospect Plains Road in Cranbury and S&S Activewear’s 480,425-square-foot renewal at 16 Applegate Drive in Robbinsville.
Still, C&W found that northern and central New Jersey overall posted negative net absorption of 2.4 million square feet in the quarter, amid the acceleration of both vacant sublease and direct space. Notably, the region also saw around 3 million square feet of newly constructed warehouse space hit the market.
A report by NAI James E. Hanson had similar findings, noting that the overall market vacancy rate is up by 130 basis points due to the new deliveries in Q2, thanks to projects that were initiated at the peak of the market 18 to 24 months ago. The real estate services firm added that subleasing has reached the highest level since 2012, according to its research, with nearly 6 million square feet of space available on the market.
Meantime, the pricing acceleration has slowed over the last several quarters after the dramatic increases seen during the COVID-19 crisis, NAI Hanson said.
“However, these indicators indicate a return to the more typical pricing and demand conditions seen before the pandemic,” said James Delmonte, vice president and director of research for the Teterboro-based firm. “The fundamental factors such as population, location and size, which have been the driving force behind the region’s strength to date, remain intact and will ensure that it continues to be one of the nation’s strongest markets in 2023 and beyond.”
Continued bright spots in the region include the Ports submarket, which continues to see significant demand for space despite the recent slowdown in traffic at Port Newark-Elizabeth, Delmonte said. According to the firm’s report, the New Jersey Turnpike submarkets around exits 7A, 8A, 10 and 12 also continue to see significant pricing acceleration and low vacancy.
