By Joshua Burd
If there’s any doubt about the demand for new industrial space in New Jersey, look no further than the response to speculatively built warehouse and distribution projects in 2016.
New research by Cushman & Wakefield found that, heading into 2017, roughly 11.3 million square feet of industrial space was under development in northern and central New Jersey. While most of those projects originally broke ground on spec, the firm said only half of that square footage remains available due to the lack of existing Class A options in the market.
As such, researchers with the firm believe tenant demand should offset much of the new supply coming online, even though most of the projects will be completed in the coming year.
“Despite the recent influx of new developments, the market is in no danger of becoming overbuilt in the near future,” said Jason Price, Cushman & Wakefield’s research director, tristate suburbs. “The need for modern warehouse space has been evident as tenant interest in many of the speculative properties under construction has been healthy.”
Those are among the findings of the firm’s fourth-quarter and year-end market report for the state’s main industrial market. C&W found that strong market fundamentals continued to fuel new development in the sector in 2016, as overall net absorption reached an all-time high of nearly 15 million square feet and leasing volume surpassed 30 million.
Among the large deals recorded during Q4, at least two were signed at buildings that are still under construction. Modway, a furniture distributor, leased 635,000 square feet at 329-359 Wyckoff Mills Road in East Windsor, while UB Distributors took 302,727 square feet at 46 Meadowlands Parkway in Secaucus, a project that only broke ground during the fourth quarter.
The combination of intense demand and a large development pipeline kept overall vacancy flat in Q4, C&W found. For the whole year, the market recorded 16 industrial deals of more than 300,000 square feet, with e-commerce accounting for more than half of that activity.
All told, about 4.2 million square feet of new industrial space was delivered during 2016, 27.3 percent more than 2015, the firm said. Much of the new product delivered was concentrated in the New Jersey Turnpike Exit 8A submarket, while almost 60 percent of the space still under development is located between Exits 12 and 7A.
The thirst for new space is expected to keep upward pressure on asking rents, experts with Cushman & Wakefield said. Rents in Q4 saw a 7.75 percent increase from the previous quarter, to $7.75 per square foot, with the Meadowlands and port regions leading the way.
“While it may not reach the record levels of 2015 and 2016, demand should remain healthy and steady in 2017, specifically along the NJ Turnpike as the e-commerce boom continues to fuel logistics and last mile deliveries leasing in the region,” said Andrew Judd, Cushman & Wakefield’s New Jersey market leader. “We’re projecting that asking rents will trend higher throughout the year as Class A options remain relatively scarce and new construction deliveries come online along the highly sought after Turnpike submarkets.”