SADDLE BROOK, NJ–New Jersey's industrial real estate market made significant headway in 2014 overall, despite a moderate finish in the fourth quarter, according to CBRE's Q4 2014 New Jersey Industrial MarketView Report. Leasing velocity amounted to 3.43 million square feet – less robust than in previous quarters.

“The fact that net absorption maintains positive momentum is a sign to me that, although there is a good amount of construction, it is controlled construction, so it is not impacting us as it has in the past, with developers saying that the market's getting better and then everybody starting to build at the same time,” Mindy Lissner, executive vice president at CBRE, tells GlobeSt.com exclusively. “Whoever has sites and is ready to build, they've been watching each other and watching the market and trying to be smart about when to put shovels in the ground.”

2014's net absorption totaled a positive 8.2 million sq. ft. – a 371 percent increase over 2013, despite registering a negative 1.12 million sq. ft. of absorption in the fourth quarter. Availability for Q4 2014 increased 10 basis points, up from the third quarter to 9.2 percent. This proliferation can be largely attributed to the new speculative projects coming to the market.

“The underwriting on all of this new construction is necessitating some pretty high rents, says Lissner. “So I think they are just looking to see if there continues to be rent growth.”

Lissner thinks market participants are being more prudent in timing their development decisions. “There's a lot of large deals that are circling, that have been circling for a while, and they are going to start landing,” she says. “All it takes is for two or three deals to happen, and the choices start to dry up quickly.”

Relative to 2013's standout activity, New Jersey's industrial market registered a total of 18.4 million sq. ft. of leasing activity for 2014 – representing a 19.8 percent drop in total new leasing. Renewals for the fourth quarter of 2014 accounted for 34.8 percent of the overall activity, as compared to 37.9 percent in the third quarter. Most notably, The Home Depot renewed 192,000 sq. ft. in its 8A location and Sealed Air committed to an additional five years in Central Bergen. Exit 8A, Meadowlands, and the Hudson Waterfront submarkets combined accounted for over 60 percent of the total new leasing activity.

Increases in average asking lease rates and the average taking rates convey a continued tightening of the industrial market. The weighted average taking rate for 2014 sat just 9.7 percent below the average asking rate in 2009 – this spread measured 26.8 percent. As of Q4 2014, asking lease rates in the state currently stand at $5.54 per sq. ft. – up 3.4 percent from this same period in 2013. As a result of recent deliveries to the market, average asking lease rates in the state have climbed in several submarkets and have hit or surpassed their 2007 peak rates.

“Amidst recent economic strengthening and low federal interest rates, New Jersey industrial fundamentals have remained resilient,” says Nicholas Nitti, first vice president, CBRE. ”2014 saw 17 new projects completed, signifying the most active year of industrial development in the new millennia. In the coming quarters, it will be especially important to continue to monitor completion activity and its impact on availability and asking lease rates.”

Currently, 4.3 million sq. ft. of additional space is expected for completion by the end of 2015, 84 percent of which is currently listed as available. Early indicators suggest continued momentum into 2015 as the industrial market has made significant progress over the past several years – registering positive absorption year-after-year since 2010.