A recent report from Colliers International projects a bright 2015 for the Northern and Central New Jersey industrial markets after a robust fourth quarter of 2014.
The report labeled the year’s finale as “robust” and pointed to vibrant year-end leasing totals, and rising construction activity as the basis for its optimism.
In addition, the overall availability rate for Northern and Central New Jersey in the fourth quarter was 12.3 percent, down from 12.4 percent in the third quarter and 12.7 percent a year ago, registering its lowest rate since 12.2 percent at the end of 2008. Healthy leasing activity pushed net absorption into positive territory for the eighth consecutive quarter. The fourth quarter closed at 1.2 million square feet of positive net absorption.
“New Jersey’s Northern and Central industrial market continues to be robust, and based on current levels of tenant demand and commitments from owners and developers, we expect another healthy year in 2015,” said Robert R. Martie, Executive Vice President of the NJ Region for Colliers International.
“Availability rates continue to decrease and sales remain strong. All of these factors, combined with ongoing port terminal activity, contribute to a fundamentally healthy industrial market, which keeps pushing up asking rents.”
The increasing port activity has been a boon for the New Jersey side of the Hudson, as tenants seek the proximity to Manhattan without the Big Apple price tag.
“We saw a lot of activity in the Hudson waterfront, said John Obeid, head researcher for Colliers NJ. “About 23 percent of the leasing that occurred was on the water front.”
“We see a lot of tenants coming from New York into New Jersey,” Obeid continued, pointing to the lower prices and the state incentives as catalysts for the rising leasing numbers.
“If you look at industrial, it’s just overall a very healthy market,” he said. “(Tenants have) a huge amount of consumers within a day’s drive.”
In total, the fourth quarter registered 7.8 million s/f of industrial leasing activity, up 13.7 percent from 6.8 million square feet in the third quarter, and up 2.7 percent from 7.6 million square feet the year prior.
The average asking rent for Northern and Central New Jersey posted a significant 5.2 percent increase year-over-year, closing the fourth quarter at $6.11/sf up from $5.81/sf, and $6.05/sf quarter-over-quarter. Central New Jersey reached its six-year high of $5.97/sf, up from $5.91/sf in the third quarter and $5.42/sf the year prior. Meanwhile, the average fourth quarter asking rent in Northern New Jersey registered $6.24/sf, up from $6.17/sf and $6.14/sf in the third quarter and year-over-year, respectively.
Construction activity also remained strong. The fourth quarter ended with 11 properties under construction set to deliver more than 3.1 msf, with 2.7 msf of that total being built on spec, demonstrating that owner/developers anticipate at least several more quarters of active leasing.
This level of soon-to-be-completed construction follows several additional new projects. Owner/developer Trammel Crow recently completed 10 Knox Drive in Piscataway, and then leased the entire 305,751 sf facility to SHI International. Also, La-Z-Boy leased 183,084 sf at 3 Montgomery Way in Robbinsville, which owner/developer Matrix Development completed last quarter.
The healthy leasing market also attracted a substantial influx of investment capital to the Northern and Central New Jersey market. In the top industrial trade of the year, based on price/sf, TIAA-CREF recently purchased 680 Belleville Turnpike, a 135,115-sf distribution facility in Kearney from Russo Development, for $32.1 million or $237/sf.
The 16-acre property was constructed for Pepsi in 2007 and features 18,000 sf of office space, 16 loading docks, 36-foot clear ceiling heights, and a significant amount of trailer parking.
The Northern and Central New Jersey’s average asking sale price reached $65.21/sf at year end, up from $64.27/sf the year prior. Year-to-date total sales exceeded $1.4 million. Although this number is down from $2.1 million seen last year, it’s still decidedly above the post-recession average of $950,000 from 2009-2012.