Third Quarter Average Asking Rents for Class A Industrial Space in Northern and Central NJ Climb to $9.28PerSq.Ft.
According to CBRE, demand for industrial space in New Jersey continued to be extremely robust during Q3 2019. The market’s overall strength was illustrated across all metrics with the exception of leasing velocity, as a lack of high-quality space on the market inhibited dealmaking.
The average asking rent for all classes of industrial properties climbed by $0.15persq.ft. and set a new high of $7.54persq.ft. to end the third quarter. Class A industrial space in Northern and Central New Jersey also saw record high asking rents of $9.28 per square foot in Q3. The availability rate for Class A space in most submarkets is under one percent, while the availability rate for all classes continued downward to end the quarter at 5.9 percent, the lowest point in CBRE’s historical industrial data going back to 2001.
Given the lack of desirable industrial space available in the market, leasing activity of 5.49 million sq. ft. decreased by 18 percent from Q2 2019 and eight percent from Q3 2018. In addition, net absorption declined 15 percent to 530,000 sq. ft. from Q2 2019, marking the second straight quarterly decline in net absorption.
“Demand for quality industrial space in New Jersey remains very strong as more e-commerce and last-mile logistics companieslook to either expand or relocate their operations in the state,” said William Waxman, Executive Vice President, CBRE. “Unfortunately, demand has once again outstripped supply. More new construction is needed to keep up with the demand that shows no signs of abating.”
The third quarter saw construction starts for five buildings and 2.63 million sq. ft. These new projects are all located in Central New Jersey, with three buildings and 1.93 million sq. ft. in the Route 287/Exit submarket. Completions in Q3 2019 totaled over 989,000 sq. ft., composed of four buildings with almost 839,000 sq. ft. pre-leased. Approximately 150,000 sq. ft. in two buildings was completed in Northern New Jersey in Q3 2019. Interestingly, most of the new product was pre-leased upon delivery.
Major leases in New Jersey during Q3 2019 included a 1.15 millionsq.ft. renewal by Barnes & Noble at 1 Barnes & Noble Way in Monroe Township and a 977,616sq.ft. new lease with The Home Depot at 225 Elm Street in Perth Amboy.
On the investment sales front, overall industrial sales increased slightly by three transactions and almost 300,000 sq. ft. compared to Q2 2019. Notably, the biggest difference between the two quarters was in the type of buyer. The confluence of demand for large blocks of space and a deep supply of cheap capital has attracted more investor and institutional interest into the New Jersey industrial sales market and has crowded out owner-users. Investors accounted for 22 transactions in Q3 2019, seven more than Q2 2019. Owner-users accounted for 12 transactions, at nearly 887,000 sq. ft. Sale-leaseback transactions are also increasing as user-owners are looking to capitalize on their rapidly appreciating assets.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
