By Joshua Burd
E-commerce users led the charge in fourth-quarter industrial leasing in New Jersey, setting up what could be another record-setting year for owners and developers of logistics space.
Those are among the findings of new research by JLL, which highlighted a “banner” fourth quarter that saw 12.3 million square feet of leasing by industrial users in the state. That total eclipsed the next-closest quarter in the past 20 years by nearly 25 percent, as demand continued to outpace supply by a wide margin.
Traditional and e-commerce retailers accounted for a substantial portion of the growth, combining for more than 3.4 million square feet of leasing, JLL found. The firm also cited an e-commerce company that signed six leases during Q4 totaling 1.8 million square feet, coinciding with its roll out of free one-day shipping on most purchases.
The report did not disclose the tenant’s name, but outside sources have pointed to a similar fourth-quarter leasing volume in New Jersey in by Amazon.
The JLL research, authored by Alex Kachris, found that “voracious demand has resulted in a shortage of large blocks of space in the market.” The reported noted that 14 tenants signed leases of more than 250,000 square feet, twice as many as the 12-quarter average, which forced the vacancy rate for buildings in the size segment to 2.1 percent.
Developers are racing to meet the demand, the report noted, especially in a market in which overall average asking rents have risen to nearly $9 per square foot.
“The record levels of demand combined with an increase in construction activity will propel the market to new heights in 2020,” the JLL report stated. “Thanks to several forecasted Northern New Jersey ground breakings in the first two quarters of the year, construction deliveries will surpass the cycle highs achieved in 2018.”
In the meantime, the firm found that 63.1 percent of the projects under construction in the New Jersey market area are already leased, which has given existing landlords and developers significant leverage in lease negotiations. As a result, Class A average asking rents rose 21.4 percent year over year, the fourth consecutive year of 15 percent growth.
“Given the record levels of preleasing, absorption is expected to keep pace with this new supply and should drive vacancy closer to 2.0 percent,” JLL wrote. “As a result, tenants looking for space should be prepared to pre-lease new construction availabilities, as the supply environment seems continually unable to satiate the market’s current levels of demand.”
