By Joshua Burd
Demand for New Jersey industrial space continues to surge, causing asking rents to skyrocket even as developers race to deliver new buildings.
A new report by Transwestern Commercial Services found that the nearly 6 million square feet of industrial space currently under construction in the state’s core market is not enough to satisfy demand. The firm cited the growing number of national retailers seeking a presence in the state, which is fueling new requirements and a continued boon for landlords.
To that end, Transwestern found that asking rents in the state’s three most highly sought-after submarkets — Bergen Central, the Hudson waterfront and the Meadowlands – have eclipsed double digits. The state’s overall average has risen to $8.38 per square foot.
“Rents in prime submarkets continue to rise, and in some cases, lease rates are even higher than asking prices, especially for new construction,” said Alex Previdi, a managing director in the firm’s New Jersey office. “The demand is such that there is an increase in opportunities for developments to accommodate some of the smaller users in the food, manufacturing and transportation industries.”
The surge follows a year in which New Jersey saw a near-record amount of new development in the industrial sector. Transwestern said that, although there was more than 14 million square feet of industrial product under construction in New Jersey as recently as 18 months ago, much of the new space has already been leased.
Besides grappling with steep rent increases, large tenants are committing to planned developments that are not yet under construction, the report found. Year-over-year net absorption in the state’s industrial market has exceeded 10 million square feet for five consecutive quarters, as 18 of the state’s 25 submarkets recorded positive net absorption during that time.
Transwestern also found that much of the state’s leasing activity is taking place in manufacturing buildings, which experienced nearly 1 million square feet of absorption year over year and a spike in rents of more than 20 percent.
“New Jersey has added manufacturing jobs for five consecutive years, and consumer spending remains extremely strong, with the trend toward online shopping serving as the driving factor,” said Matthew Dolly, the firm’s New Jersey research director. “Since this reality makes proximity to customers paramount, retailers that are not yet here continue to target New Jersey because of its access to the region’s densely populated, wealthy consumer base.