Declining Asking Rates Create Significant Opportunities In New Jersey's Industrial Market, Finds CB Richard Ellis
By Mel Fabrikant Tuesday, July 21, 2009, 05:14 PM EDT
Bill Waxman
According to CB Richard Ellis' Second Quarter 2009 New Jersey Industrial MarketView report, average asking prices for industrial space in Northern/Central New Jersey has declined at the close of the second quarter, as landlords adjust pricing to be more in line with reduced demand. This decrease has in turn created significant opportunities for tenants across the state, particularly for entrepreneurial companies who are more willing to sign longer lease extensions to lock in current rates.
However, while this decline in asking rates has positively impacted some market indicators, such as net absorption rates, which have improved by 900,000 sq. ft. from last quarter, and availability rates, which are slightly down across most submarkets, the overall performance of New Jersey's industrial market remains consistent with national trends.
"With the effects of the global credit crunch continuing to impact the New Jersey industrial markets, landlords remain focused on stabilizing their assets by decreasing the asking lease rates, which has in turn created significant long-term leasing opportunities for tenants that are willing to take advantage of these terms," stated William Waxman, senior vice president at CBRE. "More specifically, average asking prices have dropped $5.58 per square foot from last quarter, resulting in a slight decrease in availability rates in some submarkets, including Linden/Elizabeth (down to 12.3% from 12.7%) and Trenton/295 (down to 19.5% from 21.7%). Entrepreneurial tenants have taken advantage of this market swing by signing long-term leases at lower asking rates, while institutional firms and Fortune 500 companies have been more hesitant to react."
Posting even higher performance numbers than Northern New Jersey, the Central New Jersey industrial market ended the quarter at 2.39 million-sq.-ft., an improvement over the 1.14 million sq. ft. of leasing activity in the first quarter. Submarkets with the most impressive performance in the second quarter included the Exit 8A, Trenton/295, and the Route 287/Exit 10 submarkets. Notable leasing transactions in these markets included Gentek Building Products' 310,000-sq.-ft. lease renewal at 11 Cragwood Road in Avenel, and Laser Logistics' 248,000-sq.-ft. lease at 147 W. Manor Way in Robbinsville. The only sale transaction was HS Enterprises' 38,062-sq.-ft. purchase at 33 McGuire Street in East Brunswick.
Average net asking lease rates in this quarter stood at $5.76 per sq. ft., representing a $0.14 decrease from last quarter. In Northern New Jersey, though the Suburban Essex submarket experienced a high lease rate drop, down $0.59 per sq. ft., rates remained largely unchanged. In Central New Jersey, the overall rates declined by nearly four percent, with the most significant drop occurring in the Route 78 East submarket (a $1.64 decrease from last quarter), while the Brunswicks/Exit 9 submarket recorded a $0.28 increase from last quarter, resulting in the highest availability increase across the state.
"Up until recently, there has been a significant divide between asking rates and actual rental rates in New Jersey's industrial markets, which has slowed deal flow, increased availability rates and negatively impacted net absorption across all submarkets in Northern and Central New Jersey," commented Mindy Lissner, senior vice president at CBRE. "However, at the close of the second quarter, we have started to see this gap narrow as landlords have become more realistic with asking rents in order to protect their assts and tenants become more aggressive in taking advantage of these reduced price points. This shift has resulted in an increase in leasing velocity, which we believe will continue into the next quarter as the market continues down its path to equilibrium. We remain positive in our outlook going forward and are advising our clients to continue to be aggressive and take advantage of the opportunities that have been created during this truly unique and challenging downturn."
About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services firm (in terms of 2008 revenue). The Company has more than 30,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis has been named a BusinessWeek 50 "best in class" company three years in a row and a Fortune 100 fastest growing company two years in a row. Please visit our Web site at www.cbre.com.
