By Joshua Burd
Landlords and developers are still reaping the rewards of New Jersey’s tight industrial market, where rents continue to rise well above average asking rates.
A market report by CBRE found that transactions in the second quarter approached $13 per square foot in northern New Jersey and $10.50 per square foot in central New Jersey, well above average asking rates. The firm also noted that the spread between average asking rents and actual taking rents will continue to expand, as the majority of newer buildings are offered without a published asking rent.
“As market fundamentals remain incredibly strong, although fluctuating, New Jersey’s industrial market continued to break records with higher asking rents and very low availabilities for quality product,” said Mindy Lissner, an executive vice president with CBRE. “Given New Jersey’s central location, at the epicenter of the Northeast distribution corridor, and strong demand by e-commerce and logistics users, the market is poised to remain robust for the foreseeable future.”
The upward trend comes as vacancy fell to 6.2 percent, the lowest rate seen in the New Jersey industrial market since early 2005, from 6.4 percent in the first quarter, CBRE found. Leasing activity totaled 6.7 million square feet, contributing to 3.6 million square feet of net absorption.
Much of that activity has come in the form of preleasing. A separate report by Colliers International highlighted several commitments by tenants prior to the completion of new construction, including Amazon’s plan to take 625,000 square feet at Bridge Development Partners’ project in the Somerset section of Franklin.
Meantime, Performance Team preleased 444,940 square feet at 3 Brick Yard Road in Cranbury, Colliers said. The report also highlighted the impact of rising rents, particularly in North Jersey, where it tracked an 18.2 percent increase in asking rents from midyear 2018.
“While users are starting to feel some sticker shock as the new pricing reality sets in, the demand for same-day delivery will continue to drive demand in these submarkets as they offer proximity to New York City,” Colliers wrote. The report later noted: “With a lack of buildable land, developers and users continue to compete for existing inventory across (northern New Jersey).”