PARSIPPANY, NJ—Inventory remains tight and tenants are searching farther afield for quality New Jersey industrial space, Transwestern says in its second-quarter industrial research report. Industrial properties east of Interstate 287 are experiencing a surge of activity, with an intensified interest in outer regions with accessibility to the port markets.

“We expect that potential redevelopment properties could see tenants in place even before construction is complete,” says Alex Previdi, managing director at Transwestern. “Product east of I-287 is extremely hot right now, with the highest activity in the Meadowlands, the ports and central New Jersey submarkets along the New Jersey Turnpike.”

Key highlights of the Transwestern report are:

• Vacancy rates for existing product are holding strong at 7.5 percent, improved from eight percent in second-quarter 2014, with an additional 2.8 million square feet of space currently under construction.
• Asking rents are virtually unchanged at $5.73 for the quarter vs. $5.68 last year.
• The Turnpike submarkets in central New Jersey continue to attract big-box users while the Meadowlands submarket has strengthened with leasing activity by tenants in the 150,000- to 250,000-square-foot range.
• Throughout New Jersey, more than 7.3 million square feet was absorbed year-over-year, marking the second-highest 12-month total since fourth-quarter 2008 and the ninth consecutive quarter that the industrial market recorded positive net absorption
• While land for industrial development remains scarce, several sites are primed for mixed-use development, including the one million-square-foot former Congoleum Corp. site in Hamilton Township. As previously reported by GlobeSt.com, NAI Mertz is marketing the property.
• The former Tuscan Dairy site is also being demolished and will be transformed into a state-of-the-art distribution center slated for completion later this year.

“The redevelopment of aging inventory will only improve occupancy rates,” says Transwestern research director Matthew Dolly. “Similar to the office market, industrial inventory is not immune to being upgraded to fit the new standards of today's big-box users. For example, Amazon – which signed the largest lease in New Jersey during the quarter – and Walmart are demanding ceilings as high as 40 feet throughout the country. We anticipate third-party logistics providers will follow the lead of these Fortune 100 companies, further adding to the demand for distribution centers.”