SADDLE BROOK, NJ-It’s back--the New Jersey industrial market, that is, according to findings in CB Richard Ellis' First Quarter 2011 New Jersey Industrial MarketView Report. New leasing activity hit its highest level in four years, sales activity rose 98.2% over 2010, and new tenants are coming to the market.
Available space declined 38 basis points from Q4 of 2010, leading to a vacancy rate of 11.6%. A positive 2.47 million-square feet of space was absorbed during the quarter, the highest net absorption since Q1 of 2007. And it doesn’t appear that the good news is a momentary blip, William R. Waxman, EVP at CBRE, tells GlobeSt.com.
“I don’t think it can be anything but a turnaround,” Waxman says. Leasing activity in Q1 totaled 6.37 million-square feet, up 14.1% from Q4 of 2010. Central New Jersey accounted for 64.9% of the new leasing activity, largely because it has much larger buildings than the northern section of the state, Waxman observes. In addition, a couple of recent large deals including Wakefern Food Corp’s 1.06-million-square foot deal in Carteret, NJ and I/O Data Centers' 831,000-square-foot lease in Edison boosted the numbers.
“The momentum will continue, particularly as brokers see space being signed, sending the message that you’d better act now,” says Mindy Lissner, EVP for CBRE. Transactions are picking up as well. The 2.62-million-square feet of sales activity in Q1 not only is nearly twice the activity of the fourth quarter of 2010, but also represents a 48.9% increase over the Q1 of 2009. These deals include the sale of the 1.4-million-square foot 67 Whippany Rd. in Whippany and the 330,000-square foot 101 Railroad Ave. in Ridgefield.
Net space absorption also is on the rise, with 2.47 million-square feet absorbed during Q1, and vacancy rates down 38 bps from the previous three months. This is the best such improvement since Q1 of 2007. Vacancy is now 11.6%. “With no new construction, there are no options,” Lissner says. “It’s typical of a cycle. A lack of new construction ultimately will lead to absorption of existing space.”
New tenants also are coming in to the market, a positive sign, both Waxman and Lissner say. In Q1, renewals accounted for only 11.8% of combined new leasing and renewal activity, compared to having averaged 33.9% of combined activity over the previous eight quarters.
Construction now also is starting to pick up, CBRE reports, with more than 500,000-square feet of new buildings begun in the quarter. But don’t fear another manic cycle. “I don’t think there’s a fear of any boom,” Lissner says. “Everyone is very cautious.”
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