EAST RUTHERFORD, NJ-The industrial market continues to get star-pupil grades from Cushman & Wakefield for the third quarter – and is projected to finish 2013 in the same style.

The pace of property sales set a record for year-to-date, according to C&W. Leasing activity continued healthy, if not robust.

Almost 20 million square feet of industrial property was traded by the end of Q3, which is 5% more than in the previous record-setting period - the first three quarters of 2001.

Furthermore, it “far exceeds” the 12.9 million square feet traded year-to-date in 2012, according to Kimberly Brennan, C&W's senior managing director in the state.

“After several years of caution and limited supply coming into the market this is a highly encouraging shift,” Brennan said.

More than 8.4 million square feet of industrial buildings were sold in the third quarter alone. Among the deals were:

• 258 Prospect Plains Road in Cranbury (886,826 square feet, occupied by Pearson Education) was sold by Exeter Property Group to Bentall Kennedy for $98 million

• 698 Route 46 West in Teterboro (606,800 square feet) was acquired by TIAA-CREF for $80.8 million

• Equinix, Inc. bought 275 Hartz Way in Secaucus (403,869 square feet) for $74 million

Leasing

About 5.2 million square feet of industrial leasing was recorded in the quarter including 4.7 million square feet of warehouse/distribution deals. The largest transaction was Dynamic Marketing Inc.'s securing of 396,000 square feet at 400 Cabot Drive in Hamilton.

Year-to-date, tenants have leased 15.9 million square feet of industrial space, up 10.5% from 2012.

“Fourteen leases in excess of 100,000 square feet closed during the third quarter,” Brennan pointed out.

That means, she said, that:

• Northern New Jersey already has beat its 2012 industrial leasing total, and
• Central New Jersey is on pace to surpass last year's volume

Five of the large transactions occurred in the “Lower I-287” submarket, pushing that region over the 1 million-square-foot mark for the quarter – the highest volume of any New Jersey submarket, C&W's analysis concluded.

Vacancy

The overall industrial vacancy rate essentially stayed flat in the quarter at 8.9%. Northern New Jersey saw a 0.5% decline, while Central New Jersey recorded a 0.5% up-tick in Q3.

Vacancy declined by 5.5% in the NJ Turnpike Exit 7A submarket where McKesson took full occupancy of a new 350,170-square-foot building at Matrix Business Park.

Vacancy dipped slightly in both the Meadowlands and Port Region as demand held steady without any new product hitting the market. Of the state's five major industrial submarkets, only Lower 287 and Turnpike Exit 8A saw vacancies rise.

Along I-287's southern section, C&W attributed that to five blocks of space larger than 100,000 square feet coming to market as well as five spaces in the 50,000-100,000-square-foot range.

“Modern product is dominating when it comes to attracting and retaining tenants,” Brennan said. “Warehouse/distribution buildings with at least 32' ceiling heights boast a vacancy rate of 7.2%, compared to 9.1% for all warehouse/distribution assets.”

Rental Rates

The average overall rental rate rose by 3.1% since last year, finishing the third quarter at $5.91 per square foot. Central New Jersey rates climbed 4.9%, a more substantial rise than the northern counties.

In the third quarter, rents in The Meadowlands and Port Region inched higher, to $6.05 and $5.09 per square foot.

Average rents fell at Exit 7A in recent months to $4.56, which C&W said was partly due to some higher-priced spaces having already leased up earlier this year.