“With rising leasing velocity, diminishing availability and consecutive quarters of rental rate growth, the industrial sector remains the state's jewel for both tenants and investors,” says Monahan. “The sizable percentage of occupier pre-commitments to the new product pipeline demonstrates the significant appetite for space and the continued dominance of the industrial sector.”

Following lackluster leasing in the second quarter of 2017, the New Jersey industrial market witnessed a resurgence in the third quarter. New leases were up 37.7 percent quarter-over-quarter, and outpaced the five-year quarterly average by 11.1 percent. Year-to-date 2017 velocity is currently 18.2 percent behind that of 2016, but it is in-line with the five-year average.

While big-box transactions receive heightened attention, New Jersey is a market driven by midrange transactions (between 100,000 and 250,000 square foot). The count of mid-range leases increased significantly—up from eight in the second quarter of the year to 13 in the third quarter.

“Big-box deals receive national visibility, but the New Jersey market is largely driven by mid-range transactions, and the uptick in these deals underscores the sector's continued growth,” says Lou Belfer, senior vice president, CBRE. “With so much new construction pre-leased to big-box tenants, incoming supply doesn't alleviate the shortage of mid-sized alternatives for occupiers seeking space. In many ways, the volume of mid-range leases actually represents a better indicator of the health of leasing velocity.”

Coming off the heels of negative absorption in the second quarter of 2017, strong leasing in the third quarter helped drive absorption up 56.1 percent over the five-year quarterly average. Year-to-date net absorption totals more than 2.68 million square foot Absorption was driven by the Exit 8A and Route 287/Exit 10 submarkets, historically two of the top performers in the market.

Availability continued to tighten in the third quarter, leading to a new post-recession low of 6.8 percent. The lack of available space presents a significant challenge for occupiers, and the development pipeline is not keeping up with demand in several size ranges. Central New Jersey has been a beneficiary of this. As New Jersey's more established and saturated industrial markets continue to face supply constraints, market boundaries will continue to expand southward.

As some peak asking rates top $14.00 per square foot, average asking lease rates in New Jersey have registered consistent growth for the past five years and show no signs of slowing down. Year-over-year, average asking lease rates are up 7.4 percent. There were two construction starts in the third quarter, and there will likely be more ground breakings in the coming quarters. Current inventory under construction totals 7.86 million square foot

“The leasing velocity we saw this quarter continues to be a reflection of growing demand and constrained supply,” says Belfer. “With so little availability in established industrial markets, a growing portion of New Jersey has been able to benefit from industrial's unrelenting growth, and all factors point to these trends continuing for the foreseeable future.”