The consistent demand for Class A industrial properties in New Jersey, coupled with the state’s depleted supply of such space, has caused construction activity to pop in the last year, according to findings in CBRE Group, Inc.’s 3Q’13 New Jersey Industrial MarketView Report.
The market’s continual tightening and improving fundamentals are boosting construction activity in New Jersey with 13 projects totaling 6.59 million sq. ft. currently under development, including three new speculative projects breaking ground in the third quarter. Construction activity is up 152% from this time last year. Compared to one year ago when construction activity tallied 2.61 million sq. ft., construction activity has increased substantially as the availability of quality inventory in the market diminishes.
“There continues to be scarcity in sizable and functional Class A inventory,” said Thomas Monahan, senior vice president, CBRE New Jersey. “That includes existing, under construction and proposed construction. The development pipeline for buildings greater than 600,000 sq. ft. is very limited.”
The overall industrial market netted positive 1.08 million sq. ft. of absorption during Q3, rebounding from last quarter’s negative absorption numbers. Some of the top lease transactions of the quarter included Home Depot’s renewal at 130 Interstate Blvd. in South Brunswick and Dynamic Marketing’s new lease for 396,510 sq. ft. at 400 Cabot Dr. in Hamilton Township.
Central New Jersey’s industrial market continues to outperform the Northern part of the state, accounting for 63.4% of new leasing activity and 69.9% of renewal activity. The Central New Jersey market’s asking rent also spiked $0.11 per sq. ft., raising New Jersey’s overall asking rental rate to $5.32 per sq. ft.
“New Jersey’s industrial market will continue seeing strong demand,” said Scott Belfer, senior vice president, CBRE New Jersey. “With more than 20 active occupiers searching for 300,000 sq. ft. or greater in New Jersey, absorption should remain positive.”
The regional markets of Exits 8A and 7A are two of the top performing submarkets in the State. At the end of the quarter, they were at or above their peak asking lease rates set in 2007.
CBRE also indicates that container activity at the New York and New Jersey port terminals continues to increase, which historically prompts growth for the surrounding industrial market. August saw the highest monthly loaded container traffic in TEUs for 2013. In addition, the Port Authority of New York and New Jersey is continuing to partake in the US port industry’s East Coast race to upgrade port infrastructure in preparation for the larger cargo vessels that will pass through the Panama Canal in 2014.
The CBRE report also noted that with the e-Commerce industry’s demand for larger facilities, combined with attractive incentives offered by the State through the recently overhauled New Jersey Economic Opportunity Act of 2013, as well as companies’ desires to relocate from flood prone areas, the industrial market is experiencing natural rental rate growth in select submarkets as new product becomes leased and stabilized.
On the capital markets side, year-to-date investment purchases have already surpassed last year’s total by 21.8%, with another quarter still to go. Most of the investor demand is focused in New Jersey’s primary submarkets that are performing better than the overall state.