By Joshua Burd
Industrial leasing stayed strong in New Jersey ahead of the COVID-19 outbreak, as experts now wait to determine the long-term impact of the pandemic on the state’s surging market for warehouse and distribution space.
A new report by JLL found that Garden State industrial owners saw an extension of the robust leasing volumes seen in late 2019, recording 7.3 million square feet of leasing in the first quarter. The continued demand has yet to be appeased by increased speculative construction, as more than 55 percent of the 12.6 million square feet under construction is already leased, while Class A vacancy fell to a 20-year low of 1.8 percent.
With respect to the coronavirus crisis, JLL noted that less than 1 million square feet of tenant demand was put on hold in the first quarter as a result of the pandemic. But the report said that greater economic uncertainty, shelter in place and restrictions on non-essential business have limited tenants’ ability to tour the market and refill the leasing pipeline.
To that end, the market averaged 5.3 million square feet of new tenant requirements for each quarter in 2019, whereas the first quarter of 2020 saw just 1.8 million square feet of additions, JLL found. In total, the number of tenants searching for space has decreased 15 percent over the last quarter.
“The global pandemic’s short term effect on the market remains in flux, as the length and severity of its impact on the economy have yet to be determined,” JLL wrote in its New Jersey Industrial Insight report. “Nonetheless, the market’s low vacancy rate, disciplined construction activity and the proliferation of e-commerce are extremely compelling, holding the market’s medium to long term prospects relatively unchanged.”
According to the report, the “relentless” activity in Q1 came on the backs of two retailers — Target and an e-commerce company that JLL declined to name — which signed six leases totaling 3.3 million square feet and accounted for 45 percent of the quarter’s total volume. Target’s two leases occurred at a 1.1 million-square-foot build-to-suit property in Swedesboro, where it identified Greek Development as the developer, and at Prologis’ new 913,000-square-foot speculative project at 1800 Route 130 North in Burlington.
Upon occupancy of these leases, Target and the undisclosed retailers’ statewide footprints will total 2.8 million square feet and 15.1 million square feet, respectively. Outside reports have identified Amazon as the large e-commerce player that was active in Q1.
JLL also found that vacancy in New Jersey was 2.3 percent through March, while average asking rents rose to $8.91 per square foot.
