EAST RUTHERFORD, NJ—New Jersey's industrial sector posted the strongest year for industrial leasing the state has seen in more than a decade, Jones Lang LaSalle says in its latest quarterly industrial market research report.

The market recorded approximately eight million square feet in positive absorption in 2014, more than doubling the market's historical yearly average. Key leases on newly constructed buildings and built-to-suit projects drove much of the industrial absorption.

New Jersey's industrial market posted total positive net absorption of 1.7 million square feet in the final quarter of 2014, vs. three million square feet absorbed in the third quarter and approximately 1.8 million square feet of absorption in the second quarter.

A number of crucial transactions over the past year fueled the record-breaking absorption, including P. Judge & Sons Inc.'s commitment to 202,000 square feet at Hartz Mountain Industries Inc.'s 201 Bay Avenue in Elizabeth; Araka Sarcona Management Inc.'s renewal and expansion to 278,100 square feet at Charles Dunn Real Estate Services Inc.'s 125 Pennsylvania Avenue in Kearny; and Moulton Fulfilment's lease with Prologis Inc. for 172,249 square feet at 200 Docks Corner Road in South Brunswick. One new transaction of note recorded in the fourth quarter of 2014 was SHI International Corp.'s lease of 305,7510 square feet of speculative space in the Exit 10 submarket, a positive sign for the entire market and evidence that demand is as strong as supply.

“In November, the country saw the largest monthly increase in jobs since 2011, reducing the unemployment rate to its lowest level since the recession,” says David Knee, senior managing director at JLL. “Meanwhile, oil prices have hit five-year lows, pushing down prices at the pump nearly 30 percent over the past six months. Small business sentiment has reached seven-year highs, with businesses now citing taxes over sales as their biggest concern. Going into 2015, the combined effect of these positive economic factors could lead to an uptick in business expansion and consumer spending, giving way to an acceleration in new industrial lease signings throughout the state.”

Since climbing above nine percent at year-end 2009, New Jersey's overall industrial vacancy rate has trended lower through fourth-quarter 2014 in response to strong demand for warehouse/distribution space. The state's overall industrial vacancy rate has remained below eight percent for the past five consecutive quarters.

After New Jersey saw a record 3.7 million square feet of new industrial product added to the inventory in the third quarter, just one 550,000-square-foot facility in the Exit 8A submarket was delivered in the final quarter of the year. Approximately 1.78 million square feet remains under construction, most of which is speculative and expected to be delivered during the first half of 2015.

Capital markets activity in New Jersey remained strong in the fourth quarter. In one of the largest sales completed this quarter, TIAA-CREF acquired the 135,000-square-foot 680 Bellville Turnpike, currently occupied by PepsiCo, from Russo Development for $32 million or $237 per square foot. In addition, Stoltz Real Estate Partners purchased 300 Fairfield Road in Fairfield for $51.6 million or $123 per square foot. The 418,000-square-foot facility was sold by Fairfield BAB Group LLC.

Other highlights from JLL's fourth-quarter 2014 industrial market report include:

• The overall vacancy rate ticked downward slightly in the fourth quarter to 7.77 percent. In the past year, the industrial vacancy rate has decreased from 8.6 percent in the fourth quarter of 2013.
• The average asking rental rate for Northern and Central New Jersey industrial space rose 1.5 percent to $5.70 per square foot this quarter from $5.62 per square foot in the third quarter of 2014. Average asking rents have increased 12.8 percent during the past year.