With limited supply available and industrial tenants continuing to vie for quality, large-scale spaces in New Jersey, asking rents have reached historic highs, according to Transwestern’s First-Quarter 2016 Industrial Market report. With vacancies at the lowest levels in nearly 15 years, rents have increased in 22 of 25 submarkets year-over-year, with overall asking rents exceeding $6 per square foot for the first time since 2008.
E-commerce will continue driving the market, especially along the New Jersey Turnpike and near the ports. While rents are higher in premier locations, the shorter distance from product origin to the consumer results in lower transportation costs. From the investor perspective, there is very little supply and buyers that seek off-market product are finding opportunities to be few and far between.
Market highlights include:
- Logistics and distribution users are expanding rapidly, with the average tenant in the market seeking greater than 250,000 square feet.
- Manufacturing and specialty food preparation users are also extremely active, while activity is also steadily increasing from automotive, food groups and home goods.
- Rents in three key submarkets – Exits 11 and 13 and The Hudson Waterfront – are $1 per square foot higher than just a year ago.
- Following three consecutive quarters during which move-outs outpaced move-ins, the Morris East submarket recorded nearly 600,000 square feet of positive net absorption.
- The Hudson Waterfront posted a strong first quarter, as well as New Jersey Turnpike exits 8A, 10, 12 and 13A.
As demand continues to grow, limited supply of buildable land is causing buyers to turn their attention to redevelopment, hoping to position obsolete product for higher and better use. Developers are also seeing opportunity to upgrade existing industrial properties.
Read the full Q1 2016 New Jersey Industrial Outlook here.