The New Jersey industrial real estate is off to a strong start in 2014, with market statistics trending positive across the board, according to commercial real estate services firm Cushman & Wakefield.
The company’s East Rutherford-based Research Services team released its first quarter findings, which show healthy leasing, declining vacancies and upward movement in rental rates.
“New Jersey posted its highest quarterly leasing total since the second quarter of 2011, with 6.4 million square feet of transactions completed during the first three months of 2014,” noted Kimberly Brennan, Cushman & Wakefield’s New Jersey market leader.
“Nineteen deals in excess of 100,000 drove this activity, accounting for 57 percent of the total volume.”
This included commitments by Home Depot in Edison (470,000 s/f), Hyundai in South Brunswick (309,000 s/f) and Port Logistics Group in Secaucus (154,000 s/f).
All five major submarkets along the NJ Turnpike recorded increases in leasing activity quarter-over-quarter.
The Meadowlands, Lower 287, and Exit 8A each exceeded 1.0 million square feet in volume.
The Northern New Jersey industrial vacancy rate inched down from 8.0 at year-end 2013 to 7.9 percent at the end of March, with just more than 800,000 square feet of overall net absorption recorded.
Meanwhile, the state’s central counties experienced a more notable decline, with vacancy falling by 0.3 percentage points to 8.2 percent since year-end, with space users absorbing almost 2.0 million square feet.
Notably, three out of the five major Turnpike submarkets experienced sharp improvements in vacancy during 2014’s first quarter. Lower 287 dropped from 9.4 percent to 6.4 percent; Exit 7A dropped from 8.1 to 6.6 percent; and the Meadowlands dropped from 9.6 percent to 8.6 percent.
Looking at the warehouse/distribution sector, exclusively, overall vacancy fell 0.5 percentage points during the first three months of the year.
“Both Northern New Jersey and Central New Jersey now boast warehouse/distribution vacancy rates below the 8.0 percent mark, at 7.9 percent and 7.7 percent, respectively,” Brennan noted.
“This vital sector accounted for almost all of the market’s space absorption during the first quarter.”
These improved fundamentals have pushed direct weighted average rents up to eclipse the $6 per-square-foot mark for the first time since early 2009, according to Brennan.
“Within the warehouse/distribution sector, the average rental rate has risen by 4.8 percent since one year ago.”
Since the close of 2013, four of the five major Turnpike submarkets recorded increases in the average direct rental rate.
The Lower 287 submarket saw the most significant rise (+0.42 per square foot) as quality space dwindled. Only the Meadowlands submarket saw a slight decline in its average rate during the first quarter.
On the construction front, more than 2.1 million square feet of industrial product was delivered during the first quarter of 2014. Of that, 727,244 square feet was completed on a speculative basis.
Meanwhile, more than 6.5 million square feet of product is currently under construction in the Garden State, concentrated within the Lower 287 and Exit 7A submarkets.
“New Jersey’s post-recession momentum really comes as no surprise,” Brennan noted. “The state’s central Eastern Seaboard location and resulting proximity to dense population centers, position as home to the nation’s third-largest port, and vast, 614 million-square-foot industrial inventory have long placed it as one of the most attractive destinations for industrial users.
“Looking ahead into the heart of 2014, we expect nothing but a continuation of the market’s current progress.”