Average Asking Rent for All Property Classes Increased While Availability Rate Dropped to 6.0%

The industrial market in New Jersey remained strong despite uncertainty over the global pandemic, according to CBRE’s Q2 2020 industrial report. During the second quarter, industrial leasing totaled 5.2 million sq. ft., a 36% increase from Q1 2020. The average asking rent for all property types in Northern and Central New Jersey increased 1.4% year-over-year to $7.49 per sq. ft,. while the availability rate continued to fall and now stands at 6.0%. This represents a drop of 15 basis points (bps) from Q1 2020 and 27 bps from Q2 2019.

The second quarter proved once again the resiliency of New Jersey’s industrial market. While the first quarter was lackluster, leasing activity in both Northern and Central New Jersey during Q2 increased by 36% compared to Q1 2020 but was 23% less year-over-year and 20% less than its five-year quarterly average.

E-commerce leasing continued briskly in the quarter with eight leases signed totaling 2.2 million sq. ft., as the pandemic forced consumers to shop for staples such as food, apparel, and paper products increasingly online. This bounce-back in leasing activity suggests that the slowdown seen in Q1 2020 was merely a pause and not the start of a declining market, as has been the case for the office, retail and hospitality sectors in the region.

“The strong leasing activity during the second quarter proved once again that the industrial market in New Jersey is well positioned to withstand any disruption caused by the global pandemic,” said Larry Schiffenhaus, senior vice president, CBRE. “In many cases the market even continued to grow as e-commerce and logistics companies required additional space to meet consumer demand.”

There were 20 leases of 100,000 sq. ft. or greater signed in Q2 2020, compared to 14 in Q1, but the average deal size increased to 253,000 sq. ft. from 193,000 sq. ft. Notable transactions during the quarter included a 953,595 sq.ft. new lease by a major e-commerce tenant at 343 Half Acre Road in Cranbury; a 610,949 sq.ft. lease renewal by LT Apparel at 301 Herrod Boulevard in South Brunswick; a 318,000 sq.ft. new commitment by Salson Logistics at 2801 Route 130 in North Brunswick; a 296,000 sq.ft. renewal by Anixter an 7 Santa Fe Way in Cranbury; a 290,385 sq.ft. new lease for an e-commerce tenant at 200-250 Gregg Street in Lodi; and a new commitment of 289,698 sq. ft. for an e-commerce company at 8 B Court in South Edison.

As a result of the robust leasing during the quarter, the market’s net absorption was a positive 3.6 million sq. ft., the fourteenth straight quarter of positive outcome.

On the investment sales front, demand for core bulk industrial product has remained strong given its resistance to the economic effects of the virus that have impaired retail and hospitality assets. The industrial investment sales market saw an increase of 15% in transaction volume to $277 million from Q1 2020 to Q2 2020. Crow Holdings’ sale of 50 Veronica Avenue in Somerset at $177 per sq. ft. to CalPERS accounted for $164 million of the quarter’s total industrial sales. The other major sale of the quarter was 1201 Valley Brook Avenue in Lyndhurst for $40 million. Sitex bought the 180,000 sq. ft. vacant property at $222 per sq. ft. with the intention to renovate and capitalize on the strong demand and rents of the Meadowlands submarket.

The market also had some great news on the construction front. In May, New Jersey Governor Phil Murphy lifted the moratorium on non-essential construction, allowing for the full resumption of new industrial development projects. Given an availability rate of just 6.0% and near-record high rents, the market is likely to see significant progress over the next two quarters on the approximately 15.4 million sq. ft. of industrial projects under construction and the 20 million sq. ft. of projects in the planning stages.

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 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 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.