NEW JERSEY INDUSTRIAL VACANCY RATE REACHES LOWEST LEVEL IN 12 YEARS AT 6.8 PERCENT

PARSIPPANY, N.J. – As leasing activity continues to accelerate, New Jersey’s industrial vacancy rate has dipped to 6.8 percent, its lowest level since 2003, according to Transwestern’s Fourth-Quarter 2015 Industrial Market report. Driven by steady leasing in northern New Jersey – particularly in the Hudson Waterfront, Meadowlands and Morris West submarkets – average asking rents have soared, exceeding $7 per square foot in some submarkets.

As reported by the U.S. Department of Commerce, e-commerce accounts for 7.4 percent of this year’s total retail sales in the country, compared to 6.5 percent a year ago. Additionally, larger cargo ships have resulted in increased global trade. With these factors continuing to create a dearth of industrial space, New Jersey’s industrial market experienced its biggest year-over-year drop in vacancy since fourth-quarter 2003.

“Perhaps there is no better time than during the holidays to bear witness to the fact that online shopping is having a profound effect on physical space,” said Jeffrey Furey, managing director at Transwestern. “The effect of e-commerce on the New Jersey market has been even greater than expected, as was ascertained by the heavy traffic that surrounded Amazon’s fulfillment center in Robbinsville that the company has called its busiest on the planet.”

Highlights from the report include:

• The market’s low vacancy rate was buoyed by a strong fourth quarter, when two of the year’s three largest leases were signed.
  
• For the second consecutive year, more than 20 industrial lease transactions of 200,000 square feet or greater were executed.
  
• The Somerset submarket in central New Jersey experienced high levels of activity, as well as the New Jersey Turnpike Exit 8A, Exit 10 and Exit 11 regions.
  
• Average asking rents – $5.88 per square foot – are at the highest level since fourth-quarter 2008 and are approaching pre-recession levels.
• The New Jersey industrial market has experienced positive net absorption in 16 of the past 18 quarters.
• Product scarcity is prompting new development, as demonstrated by a new 930,000-square-foot speculative development at Exit 8A of the New Jersey Turnpike, as well as a planned 1 million-square-foot project on two sites at the Outerbridge Crossing in Perth Amboy, 5 miles from Exit 11.
• Developers are working with state and local officials to ensure that infrastructure improvements are being addressed. Many consider an investment in the Transportation Trust Fund vital as the majority of transportation from the port is via truck.
• With rising delivery costs, locating near ports and rail lines has become essential to tenants.

“The vacancy rate is especially impressive given that, when factoring in new inventory, there is nearly 36 million square feet more industrial space occupied than there was in 2003,” Transwestern Research Director Matthew Dolly said. “With most market players still bullish on industrial real estate, product scarcity has developers scouring the state for opportunities, with many now exploring contaminated sites.”

For more information, contact Dolly at 973.947.9244 or matthew.dolly@transwestern.com. The full report will be posted on Transwestern’s research page when available.

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