With 3Q18 in the Books, Cushman & Wakefield Thought Leaders Provide Observations
EAST RUTHERFORD, N.J., Oct. 4, 2018 – With third-quarter performance in the books, New Jersey’s industrial market maintains its status as one of the strongest in the nation, while the state’s office market continues to experience moderate gains, according to Cushman & Wakefield. The commercial real estate services firm’s New Jersey research team – headed by Jason Price, director – today released its latest findings, which are summarized below with ground-level commentary provided by thought leaders from the firm’s Garden State offices.
- Quarterly industrial leasing activity accelerated and reached a new historic high, totaling 8.8 million square feet – despite a historically low vacancy rate of 3.4 percent.
- Eight new leases greater than 300,000 square feet were inked.
- The largest involved online consignment retailer The RealReal, which took 492,534 square feet at 950 Convery Boulevard, Perth Amboy.
- Third-quarter industrial absorption eclipsed 5.6 million square feet, pushing the year-to-date total to 13.6 million square feet – the highest point on record at this point in the year. The market is on pace to reach an all-time high by year-end.
- 2.8 million square feet of warehouse product was completed during the third quarter. With 9.1 million square feet of construction deliveries year to date, New Jersey is on pace for its largest annual new development total this century.
Industrial Perspective: Stan Danzig, Vice Chairman
“With very little existing available space in almost every New Jersey submarket, industrial tenants have become much more decisive in their approach to leasing. Every worthwhile building has multiple prospects. Tenants who recognize this are getting out into the marketplace sooner, and with their budgets approved up front. In turn, deals are reaching the LOI stage much more quickly. Labor – both cost and supply – is also top of mind, especially with so many new, high-population ecommerce facilities. The drive to tap into the region’s most fertile labor markets is resulting in the spread of development to previously untapped markets.”
- Quarterly office leasing exceeded 1.9 million square feet, fueled by the life sciences sector, which accounted for almost 25.0 percent of this activity.
- Teva Pharmaceuticals’ 345,000-square-foot renewal and expansion at 400 Interpace Parkway in Parsippany led the pack.
- Technology, manufacturing and financial sectors also contributed to the total as New Jersey’s tenant base remains notably diverse.
- With continued strong demand, office absorption finished in the black for the second consecutive quarter. This marked the first time the market achieved back-to-back quarters of positive absorption in two years.
- Office vacancy ticked lower by 30 basis points to 18.1 percent, its lowest point this year.
Office Perspective: Dan Johnsen, Managing Director
“New Jersey’s tax incentive programs continue to be essential drivers for the larger lease transactions taking place across the market. Tenants making moves are gravitating largely to Class A properties offering the types of amenity-rich environments that provide competitive advantage when it comes to attracting and retaining talent. Additionally, existing leases are being addressed well in advance of expiration. By working on renewals up to 24 months early, landlords are looking to mitigate the risk of losing their tenants, and tenants are utilizing this time as leverage themselves in the market in order to achieve the best possible deal terms.”
OBSERVATIONS: INVESTMENT SALES AND MARKET FORECAST
A Note on Capital Markets: David Bernhaut, Executive Vice Chairman
“Investment demand for both industrial land and industrial buildings continues at a record pace, which is reflective of the current market fundamentals in Northern New Jersey. In general, the market is benefiting from record low vacancy rates and double-digit rental rate growth, which has certainly attracted the attention of the investment community. Office sales activity remains robust. Although dominated by private capital, the market participants are seeking everything from value-add, low basis opportunities to core, Class A buildings with durable cash flow as debt financing remains plentiful and attractively priced.”
Looking ahead: Andrew Judd, New Jersey Market Leader
“Moving into the final months of the year, Class A industrial space will remain scarce, despite construction deliveries. While options are limited, tenant demand for modern warehouse space is anticipated to persist, which will help keep developers confident in building on a speculative basis. On the office front, the industries that have typically been at the core of New Jersey commerce will continue to drive the office market. Deals will come in a range of sizes and stem from the life sciences industry (both pharma and biotech), financial services, the TAMI sector and healthcare.”
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value by putting ideas into action 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.