Vacancy Hits Historic Low, Absorption Reaches All-Time High During Fourth Quarter 2018
EAST RUTHERFORD, N.J., Jan. 18, 2019 – Another historic year for the New Jersey Industrial market is in the books, according to Cushman & Wakefield. The commercial real estate services firm today released its fourth-quarter 2018 research findings, revealing vacancy hitting a record low and net absorption reaching an all-time high by year end.
“The three-year stretch from 2016 to 2018 has been the strongest run for New Jersey industrial market occupancy gains and one of the most robust stretches for leasing in recent history. We also are coming off the best back-to-back years for new construction completions this century,” noted Cushman & Wakefield’s Andrew Judd, New Jersey market leader. “Much of this can be credited to the rise of eCommerce, strong import totals at the port, a healthy economy, and robust retail sales.”
Despite the scarcity of space in the New Jersey industrial marketplace, vacancy ticked lower by another 20 basis points to 3.2 percent. Warehouse space – which accounts for almost 76 percent of the state’s industrial inventory – finished the year at 3.1 percent. “Central New Jersey warehouse vacancy fell to 2.2 percent, fueled by diminishing Class A and B space from Exit 12 down through Exit 7A,” Judd noted. “Northern New Jersey’s rate has declined to 4.2 percent, with the Port and Meadowlands submarkets tightening notably.”
With 14.9 million square feet of occupancy gains, New Jersey has now exceeded 10 million square feet in annual absorption for five years in a row, for a total of more than 67.0 million square feet. The fourth quarter of 2018 marked the 24th consecutive quarter yielding positive net absorption.
Though industrial leasing reached 25.7 million square feet, fewer existing space options across the marketplace, especially for big-box options, slowed new activity somewhat during the final three months of the year, according to Cushman & Wakefield’s Jason Price, director, Tri-State Suburbs Research. The fourth quarter’s 5.3 million square feet of new activity included 17 leases greater than 100,000 square feet, yet only five exceeded 200,000 square feet. Current conditions are fueling interest in the state’s tertiary markets, and the Passaic County submarket led the way during the fourth quarter with 1.2 million square feet of new deals transacted. This included a 418,000-square-foot commitment by Gucci in Wayne and a 391,515-square-foot deal made by Corbion in Totowa.
The average asking rent for New Jersey industrial space ticked lower for the first time since early 2017, slipping to $8.49 per square foot at year-end. “This decline was not due to landlords dropping pricing,” Price said. “It ties to the lease-up of higher-quality warehouse space throughout the market and the fact that many Class A options are listed without asking prices. The trend was similar for warehouse space, which has dipped to $8.16 per square foot, though it is important to understand that that sector still finished 2018 4.9 percent higher year over year.”
2018 industrial construction completions totaled 9.4 million square feet, only slightly lower than the century high-mark of 9.8 million square feet in 2017. Of the total built in 2018, 87.2 percent was leased either during development or immediately upon completion. Meanwhile, of the just over 6.0 million square feet of industrial development ongoing in the Garden State – most of which is concentrated in the Port Region, Upper 287 Corridor and Exit 8A – 42.5 percent already has been leased.
“There is still some room left in the expansion cycle, however we expect comparatively moderate improvements in 2019 compared to the last few years,” Price noted. “The lack of existing available space options in core submarkets will return leasing to more normalized levels yet continue to push up rental rates. On the construction front, approved land sites will dissipate further, making redevelopment plays more common for developers in primary submarkets.”
To view the NJ 4Q industrial MarketBeat report, click here.
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Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with 48,000 employees in approximately 400 offices and 70 countries. In 2017, the firm had revenue of $6.9 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.