By Joshua Burd
The pandemic has not stifled rent growth in New Jersey’s industrial market, as Amazon and other e-commerce users continue to drive leasing and construction activity statewide.
New research finds that average asking rent in northern and central New Jersey is up year over year through the second quarter. Several commercial real estate services firms also note that rents are flat or up slightly from the first quarter of 2020 — holding strong above $9 per square foot — signaling the resilience of the warehouse and logistics sector.
“The strong leasing activity during the second quarter proved once again that the industrial market in New Jersey is well-positioned to withstand any disruption caused by the global pandemic,” said Larry Schiffenhaus, a senior vice president with CBRE. “In many cases the market even continued to grow as e-commerce and logistics companies required additional space to meet consumer demand.”
In its own Q2 market report, CBRE found that average asking rent for all industrial property types in northern and central New Jersey was $7.49 per square foot, which was effectively flat from the first quarter but up 1.4 percent year over year. The average asking rent for available Class A space in the second quarter was $10.45 per square foot, the report found, representing a 1 percent increase from Q1.
Multiple firms noted that e-commerce fueled lease transactions from April through June, as the pandemic forced consumers to increasingly shop online for staples such as food, apparel and paper products. Amazon continued to lead the way with a host of new leases, which researchers say totaled between 2.3 million and 3.3 million square feet during the quarter.
The largest of the Q2 leases took place at 343 Half Acre Road in Cranbury, where the e-commerce giant committed to 953,595 square feet at a property developed by Alfieri. The company is taking space at a building that was originally leased by Wayfair, the home furnishings company, but was later put back on the market.
Amazon also preleased a new 290,385-square-foot project in Lodi, where Black Creek Group is redeveloping a former BASF manufacturing plant at 200 and 250 Gregg St. The company has also committed to locations in Linden, Woodbridge, Kearny and several other municipalities as a result of its second-quarter leasing spree.
“The company was already ramping up its expansion plans before the stay-at-home economy gave e-commerce another boost, leading to a surge in signed deals,” researchers Mark Russo and Colin Hyde wrote in a report for Newmark Knight Frank. “Over the past three months, e-commerce accounted for (75 percent) of leasing activity compared to (17 percent) during the past three years.”
Recent market reports place the midyear availability rate in northern and central New Jersey between 4.5 and 6 percent. Several firms noted that, along with the accelerated demand from e-commerce, the market will remain tight as supply chain disruptions from COVID-19 push retailers to find additional space to store excess products.
“Industrial product has been the silver lining for the commercial real estate industry during the COVID-19 pandemic,” Colliers International wrote in its Q2 report. “While headwinds were felt in the office and retail spaces, industrial market fundamentals continued to improve.
“In all probability, New Jersey’s industrial won’t escape this economic downturn unscathed, but it will fare better than other property types during this period and the long-term outlook remains positive.”
Other notable Q2 transactions include Mark Anthony Brands’ 419,460-square-foot lease at Bridge Point 78, Bridge Development Partners’ 4 million-square-foot development in Warren County. Meantime, Salson Logistics signed two new leases during the quarter, taking a combined 667,459 square feet at 1120 Route 22 East in Bridgewater and 2801 Route 130 in North Brunswick.
According to CBRE, e-commerce firms accounted for 48 percent of the leased space in the quarter, followed by food-related companies with 15 percent and third-party logistics for 14 percent of activity.