NJ Market Continues Hoovering Up Industrial Space

Cranbury Station Park, Alfieri and Rockefeller Group’s large spec industrial at 48-50 Station Road, Cranbury, NJ, in Exit 8A Submarket

EAST RUTHERFORD, NJ— In one of its best years in more than a decade, New Jersey’s roaring demand for industrial space continued vacuuming availability out of the market in 2015, according to Jones Lang LaSalle’s analysis of leasing trends. JLL says the market posted 7.5 million square feet of positive absorption in 2015. Building on the momentum in the first three quarters, net absorption in the fourth quarter reached 3.9 million square feet, accounting for more than half of the positive net absorption recorded for the year. As a result of robust class A leasing activity throughout the state, vacancy in Northern and Central New Jersey fell to 6.5 percent, the lowest level since 2001. Contributing to the cycle-long lows in late 2015 was LIST Logistics’ lease of 571,000 square feet at 75 Mill Road in Edison and Serta’s lease of 460,000 square feet at 50 Bryla Street in Carteret. Boatloads of foreign capital drove industrial sales in Northern and Central New Jersey to historic levels in 2015. Sales volume for warehouse product in the state totaled $9 billion, a 56.1 percent increase over 2014, and a 118 percent increase over the 10-year historical average. Developers throughout New Jersey have ramped up speculative development projects to take advantage of the growing demand, declining vacancy rates and rising rental rates. In the fourth quarter, construction starts totaled more than 1.3 million square feet, bringing the total volume of industrial product underway to 3.2 million square feet, with more than three-quarters of the volume being built on spec. Developers continued to focus construction in the Exit 8A submarket where vacancy has dropped below 4.2 percent. The largest project currently underway in this submarket is Alfieri and Rockefeller Group’s joint venture at 48-50 Station Road in Cranbury. As previously reported by GlobeSt.com, the 930,000 square-foot site is the only building of its size currently available, with anticipated delivery in the first half 2016. With this project and many others expected to deliver during the next 12 months, vacancy rates could see renewed upward pressure as large amounts of supply hit the market in 2016. “Developers are breaking ground at an accelerated rate, after the majority of available class A space was leased in 2015 ” says David Knee , senior managing director at JLL . “Nearly four million square feet of class A space was leased during the last six months in New Jersey. While plenty of demand remains in the market, available class A space is extremely limited, hampering continued class A leasing activity at such a rapid pace.” Other highlights from JLL’s fourth-quarter 2015 industrial market report include:

• Year-over-year, the overall vacancy rate declined 50 basis points to 6.5 percent in the fourth quarter of 2015.
• The Northern and Central New Jersey average asking rental rate rose two percent from fourth quarter 2014 to $5.82 per square foot at year-end.