The core turnpike markets currently have a 3.5 percent vacancy rate for warehouse facilities. Price says that most of these submarkets recorded quarterly declines in vacancy, including Upper 287 (-150 basis points) and the Meadowlands (-70 basis points).

Existing big-box space options (300,000 square feet or larger) are limited along the turnpike, with just eight available for immediate occupancy, half of which have clear heights of 32 feet or higher. Furthermore, there are just three such buildings currently under development, some of which are expected to lease up in the coming months.

While asking rents haven't risen at the same torrid pace as in 2015 and 2016, they have increased 4.4 percent year-over-year. After a flat Q1, warehouse rents eclipsed $7.00 per square foot for the second time in recent quarters, and, at $7.08 per square foot, surged 38.8 percent since the end of 2012. Quarter-over-quarter, most of the core submarkets experienced rent increases, specifically Exit 8A, which rose 25.1 percent to $6.04 per square foot due to robust demand and tight market conditions. As the highest-priced submarket in New Jersey, the Meadowlands now commands an $8.25 per square foot average rental rate for direct space, a 14.2 percent premium over the state average, buoyed in large part by its prime location directly across the Hudson River from New York City.
Even as rents tick up, the appetite for industrial space throughout Northern and Central New Jersey remains unprecedented.

“Demand during this extended expansion cycle is unlike any other seen before, as e-commerce has directly and indirectly fueled leasing activity, specifically along the turnpike,” Judd says. “Logistics and last-mile delivery firms continue to lease space at a brisk rate while major e-commerce companies have taken some of the largest warehouses along the turnpike in recent years, including facilities which were under construction at the time of the transaction.”

To satisfy demand—and with quality space options dwindling in core submarkets—Price noted that developers have responded feverishly, with more than 5.1 million square feet of new industrial facilities delivered during the first half of 2017, already exceeding the annual total achieved throughout all of 2016 (4.2 million square feet). Of that total, 79.2 percent has already leased up, and of the 18 projects completed, only five are still available for lease. Almost 7.6 million square feet of developments are currently underway, the majority of which are anticipated to deliver before the end of the year, pushing the 2017 annual total to the highest this century. More than half of the space is already committed, while most of these projects are concentrated in Exit 8A, Exit 7A, and Upper 287. Furthermore, there are sites scheduled to break ground during Q3 in Exit 8A, Upper 287, and the Port Region.

Price added that the second quarter marked the ninth straight quarter in which more than six million square feet of new leases were signed. Exit 8A led the way in terms of Q2 demand, with 1.7 million square feet of deal volume, 57 percent of which occurred in not-yet-built facilities. While year-to-date leasing is down compared to the record breaking 2016, the market remains on pace to finish well above the annual average during this expansion cycle. And of the 7.5 million square feet of signed leases this year exceeding 100,000, pre-leasing activity accounted for 52.2 percent of the total.

The largest Q2 industrial deals in Northern and Central New Jersey—all for warehouse/distribution space—included:

• A 991,348-square foot e-commerce firm lease at 2 Brick Yard Road in Cranbury
• A 607,736-square foot footwear company lease at 1240 Cranbury So. River Rd. in Cranbury
• Midwest Air Technologies' 369,313-square foot renewal at 1 Truman Drive in Edison
• ZT Group's 202,148-square foot lease at 1000 Secaucus Road in Secaucus
• AEW's $147 million acquisition of a 1.2 million square feet portfolio from The Hampshire Companies.