A rendering of 11 Engelhard Drive in Monroe, where J.G. Petrucci Co. Inc. is slated to break ground on a 130,000-square-foot building for L&R Distributors — Courtesy: Newmark Grubb Knight Frank
By Joshua Burd
Middlesex County continues to be the epicenter of industrial leasing in northern and central New Jersey, thanks largely to its size and ability to meet the demand for newly developed, state-of-the-art distribution space along the New Jersey Turnpike.
That was among the findings in a new market report by Newmark Grubb Knight Frank. The third-quarter research by the firm found that the activity around the county, fueled by deals around Exit 8A, totaled nearly 3.4 million square feet of positive net absorption.
“There’s good product in the submarket and it is well-located with New Jersey Turnpike access,” said Mark Russo, NGKF’s research manager for northern New Jersey. “It’s not quite as prized as the Meadowlands, but it has the kind of product that tenants want.”
Activity in the county — the largest submarket tracked by NGKF — accounted for more than half of the 5.7 million square feet of Q3 net absorption in northern and central New Jersey. That caused the availability rate for warehouse and distribution space to further tighten for the entire region, dropping to 8.5 percent from 9.2 percent in the second quarter.
Availability is now 2.4 percentage points lower than at this time last year, NGKF said, giving landlords pricing power. Market-wide, average asking rent has risen 8.1 percent year-over-year to $6.78 per square foot market-wide
In the Middlesex County/8A submarket, direct average asking rent was $6.72 per square foot in the third quarter. Availability there has dropped to 7.6 percent, down from 10.9 percent a year ago, thanks in part to several large deals throughout the year.
In Q3, CDS Logistics leased 250,000 square feet at 301 Middlesex Center Blvd. in South Brunswick. Nearby, O’Neill Logistics leased 221,092 square feet at 130 Interstate Blvd.
And L&R Distributors will occupy a 130,000-square-foot warehouse at 11 Engelhard Drive in Monroe, where J.G. Petrucci Co. Inc. will break ground later this week.
The activity around 8A comes after a second quarter in which Wayfair leased more than 1.2 million square feet in Cranbury at a new distribution complex built by the Rockefeller Group and Alfieri LLC.
But even with the dominance of the 8A submarket, the largest deal of the third quarter took place in the Meadowlands. Amazon expanded its footprint in New Jersey by leasing 616,992 square feet at 698 Route 46 in Teterboro, a 62-year-old building five miles from the George Washington Bridge.
“It’s just interesting that, with the age of that building, you have this e-commerce giant stepping in and leasing it,” Russo said. “It’s about that location.”
Across the market, the 8.5 percent availability rate is at its lowest point in more than a decade, according to NGKF’s third-quarter report. The research also found that the region has a 6.2 million-square-foot development pipeline, which is still less than half of what was under construction in 2007.
About 1 million square feet was delivered during the quarter, a pace that could slow unless landlords come up with more creative solutions.
“The increasing scarcity of suitable sites and lengthy entitlement process is likely to moderate development activity over the next few years,” Russo wrote in the report. “On the other hand, rising rents and strong investor appetite may justify the redevelopment of older product or even conversion to industrial from other land uses.”